Tag: #CSR

Corporate social responsibility and societal governance

By Jeremy Moon

◦ 3 min read ◦

Russia’s invasion of the Ukraine reminds us that corporate social responsibility (CSR) is both a reflection of the times we live in and also dynamic! Numerous corporations, acting in response to social and political pressure, are withdrawing from Russia on the grounds that human rights, and a nation’s rights, are being trampled on. This is not to say that these decisions necessarily come easily: there may be ethical, strategic, stakeholder and political tensions. But the point is that perhaps the most basic societal issue of war and peace – and its governance – enters CSR agendas. Ethical investors are even considering the defense industries as suitable for their assets.

In recent decades several challenges have emerged which appear to move CSR from a relative comfort zone of discretionary activities to more core societal governance challenges, some of these manifestly involve some corporate culpability (e.g. the 2008 financial crisis, international supply chain labor abuses, climate change, ecological degradation), others like international pandemics, war and international health and welfare challenges reflected in the UN Sustainable Development Goals, may reflect wider causes. Nonetheless, corporations claim some responsibility for these issues. Even corporate ‘talk’, as well as ‘walk’, contribute to the redefinition of CSR to take in core societal governance challenges.

This is understood as right and proper from some perspectives. Medieval corporations were established precisely to achieve public ends – often of basic infrastructure. Industrial corporations were pioneers of C19th health, welfare and education systems.  In many developing countries corporations take responsibility for physical security of their employees and communities. 

But in the late C20th a view took hold that this was somehow inappropriate.  Milton Friedman’s famous 1970 critique of CSR was precisely on the grounds that corporations are not accountable for addressing such issues: governments are. Many CSR advocates, whether fearing a corporate takeover of government or vice versa, and have advocated a dichotomy between the responsibilities (social and economic) of corporations and those of governments.

Yet the last twenty years have witnessed two related phenomena which challenge the dichotomous view. First, corporations have chosen to engage in social and environmental agendas which are core for national and international governments (e.g. human rights, corruption, access to resources), whether in response to pressure or by virtue of their own ethical or strategic judgement. Secondly, governments have encouraged corporations to enjoin public efforts, through their policies of endorsement and cajoling, financial incentives, partnerships and even mandates (e.g. for energy markets, non-financial reporting, supply chain due diligence).  

Governments have recognized the distinctive resources that corporations can bring to governance questions (e.g. to innovate, to experiment, to reach beyond national boundaries, to collaborate). Interestingly in cases of mandate, governments often cede to corporations discretion as to how, rather than whether, to comply. Thus, for example, corporations can choose whether to cynically comply with international weapons sanctions on a country to sell arms by the legal use of third parties to effectively maintain the sales OR to embrace the spirit and intention of the sanctions and uniformly cease the sales to the regime in question.

But Friedman’s critique nags and critics of corporations point to unaccountable corporate power through lobbying and informal influence.  Corporations lack a traditional democratic mandate. We elect MPs and governments, but not CEOs. So is engagement with public policy (rather than legal compliance) really the business of corporations?  

My short answer is ‘yes’ on the grounds that businesses are members of society and that corporations are afforded particular privileges by the state, and thus have clear public duties. But the situation is not satisfactory.  In most democratic jurisdictions corporations’ roles ‘to make’ and ‘to take’ regulation are not clearly specified and thus their accountability is unclear.  Moreover, new international multi-stakeholder initiatives which tie corporations in with each other and with civil society often fail to effectively regulate errant organizations.  

So we have a challenge which is about CSR and politics: how to better build corporations into political institutions? I suggest that the challenge is shared – for corporations to review their political participation to ensure that it is citizenly; for civil society to engage in defining how corporations can be more accountable and to engage more directly in corporate accountability (perhaps with support from government?); and for governments to review how accountably corporations influence and respond to regulation.  

About the Author

Jeremy Moon is Professor at Copenhagen Business School, and Chair of Sustainability Governance Group. Jeremy has written widely about the rise, context, dynamics and impact of CSR.  He is particularly interested in corporations’ political roles and in the regulation of CSR and corporate sustainability.

Photo credit: TarikVision on iStock

Do nudges work in organisations?

By Leonie Decrinis

◦ 3 min read ◦

Introduced by Thaler and Sunstein in 2008, nudges have become popular policy tools to change the behaviour of consumers and citizens in desirable ways without compromising their freedom of choice. Their success in public policy domains has sparked the interest of management teams to apply nudges in organisations as means to guide the decisions of employees. However, in comparison to the ever-growing literature on the use of nudges in the public sphere, relatively little is known about their applicability at the workplace. 

More and more organisations are pursuing corporate social responsibility and sustainability strategies, for which changes in workplace behaviour are key. Nudges can help organisations promote the needed behavioural change in relevant domains, such as employee health, energy conservation, green transportation, waste management, ethics and diversity, to name just a few. A number of studies report, for example, success in promoting healthier food choices of employees through alterations in the choice architecture of workplace canteens. Other nudging interventions have led to reductions in electricity use by providing feedback to employees on the desirable behaviour of peers. Regarding workplace diversity, evaluating job candidates jointly rather than separately has proved to promote gender-mixed teams. Further, in the ethical domain, honest employee behaviour appeared to rise by reminding people about their shared moral values at critical decision points. 

The mentioned examples provide an idea of the potential of nudges as cost- and time-efficient alternatives to traditional organisational intervention tools that mostly involve trainings and sanctions with limited success. A key advantage of nudges is their behaviourally informed approach, acknowledging the role of unconscious decision processes that often contradict people’s good intentions.

By altering the choice environment rather than trying to rewire the human brain, nudges can steer employees to desirable behaviours while preserving their freedom of choice.

Just recently, the United Nations Behavioural Science Week has convened experts from international agencies, governments, academia and the private sector to discuss about these possibilities. However, what has also been recognised, as much as workplace nudging involves opportunities, it comes with challenges that need to be addressed. 

The first question that one might ask is how nudging individuals inside organisations for specific concerns leads to impactful organisational change in line with strategic corporate goals. Theory tells us that this is possible indeed by nudging a significant amount of employees. Organisations are made up of people. When enough people are nudged to alter their behaviour in a specific way, the new behaviour has the potential to become a norm, i.e. a rule for expected and accepted behaviour. Once embedded in the culture of an organisation, people are likely to conform to the new norm, so that organisational behaviour changes as a whole. 

This idea comes with a caveat though. Organisations are complex social constructs with formal and informal components of organisational culture conveying a variety of messages to employees. A gentle nudge might thereby not be strong enough to induce the desired behavioural change. Signals elsewhere in the organisation could simply counterbalance the effect of a choice-preserving nudge. Typically, nudges are designed and tested for very specific instances of human behaviour. What works in one context might not work in another one, sometimes even resulting in unintended consequences. Clarifying the effectiveness of nudges is difficult in complex organisational settings, particularly regarding their impact in the longer term. This requires consequent piloting and testing over considerable periods of time, allowing for a flexible and adaptive approach to a particular setting.

Contrary to the idea of nudges being top-down policy tools, successful intervention implementation in complex organisational choice environments requires the active contribution of employees. The latter should be consulted about their needs, involved in the design of nudges and informed about the intervention implementation. A high degree of transparency is also necessary to ensure the acceptance of nudges by employees.

Another aspect to keep in mind is that widespread organisational change, such as switching from a solely profit-oriented corporate performance to a more encompassing economic, social and environmental one, cannot be addressed by nudges alone.

Complex organisational problems need to be broken down into micro pieces, suited to be managed by a variety of measures and instruments. Not all of the resulting aspects will have human behaviour at their core. Some might be fundamentally technological in nature, requiring innovative technical solutions. For those problems that remain to be behavioural, the ones that involve serious risks will always call for stringent enforcement tools. Others, however, might be better addressed through a voluntary, trust-based approach. This is where choice-preserving nudges come into play. Clearly, a single nudging intervention can only address a very specific concern. The wider organisational success depends on the aggregate of multiple nudges as well as their interplay with other policies. Measures ultimately need to send consistent messages about desirable behaviours, aligned with an organisation’s broader strategic goals. By influencing organisational culture in an encompassing way, widespread organisational change will gradually take place. 

Further readings

Beshears, J., & Gino, F. (2015). Leaders as decision architects: Structure your organization’s work to encourage wise choices. Harvard Business Review.

Foster, L. (2017). Applying behavioural insights to organisations: Theoretical underpinnings (EC OECD seminar series on designing better economic development policies for regions and cities). Paris: OECD and European Commission. 

Ilieva, V., & Drakulevski, L. (2018). Applying behavioral economics insights at the workplace. Journal of Human Resource Management. 

Venema, T., & van Gestel, L. (2021). Nudging in the Workplace. In R. Appel-Meulenbroek, & V. Danivska (Eds). A Handbook of Theories on Designing Alignment between People and the Office Environment.

About the Author

Leonie Decrinis is PhD fellow at Copenhagen Business School with research interests in corporate social responsibility, sustainability governance and behavioral sciences. Her PhD project focuses on applying behavioral insights to corporate sustainability in order to align governance objectives with organizational behavior.

Photo credit: Rudzhan Nagiev on iStock

Corporate Social Responsibility (CSR) in Asia: Then and now

By Wendy Chapple & Jeremy Moon

◦ 3 min read ◦

This blog post is a repost and has first been published by Business and Society (BAS) blog on 27th of April 2022.

It is both a bit weird and a great honour to be invited to reflect on our paper, “Corporate Social Responsibility (CSR) in Asia: A Seven Country Study of CSR Web Site Reporting”. The process has given us a chance to reflect on what we knew then, what we know now, and how much things have evolved. Our reflections cover memories of the context and origins of the paper; the data available – and unavailable – to us at the time; the approach we took – and what we see as its virtues – and the results; and the relevance of the paper to CSR in Asia today – nearly twenty years on.

As is often the case, the origins of a well-known paper are curious. Our paper grew from the internationalization strategy of the University of Nottingham (UoN) where we then worked in the International Centre for Corporate Social Responsibility (ICCSR). UoN had opened a campus in Malaysia and was opening another in China. So, the Vice-Chancellor encouraged us to engage with our colleagues there …which made us think that we should probably know a bit about Corporate Social Responsibility (CSR) in Asia … hence the paper. Little did we know what this would lead to!

Thanks to the ICCSR, we had the funds to employ researchers with whom we analyzed web site reporting of 50 companies’ CSR in seven Asian countries: India, Indonesia, Malaysia, the Philippines, South Korea, Singapore, and Thailand (bringing a range of business systems in terms of size, religion and culture, political system, and economic development). Hang on, you say, what about China? Our answer is simply that at that time there were barely any Chinese MNCs with English language website reporting… which is certainly not the case now! Although our choice of sample skewed the population to the larger companies with a strong international business profile, this did not concern us as it strengthened the testing of the CSR-shaping role of national business systems.

We focused on broad CSR waves, i.e. community involvement, socially responsible production processes, and socially responsible employee relations. Whilst it enabled broad generalizability of the character of CSR nearly twenty years ago, it does raise some questions of compatibility with current CSR agendas in Asia. However, the more inductive identification of component CSR issues (e.g. community development; education & training; health and disability; environment) makes the findings amenable to temporal comparison, providing a more fine-grained analysis of activity within the waves. We also focused inductively on the dominant CSR modes (i.e. how the issues were addressed). This is when things got interesting. We started to see distinctive country patterns emerge in terms of issues within the waves (e.g. community issues were particularly prominent in India, Thailand, Malaysia and the Philippines, but less so in the other three countries), but this was not the case in the modes. The modes deployed within each of the waves were strikingly similar: philanthropy dominated community investment, and codes  and standards dominated production processes. In other words, the “what” rather than the “how” was nationally distinctive.

Some conclusions now seem uncontentious, most obviously that ‘community involvement’ is the CSR priority in Asia. Similarly, there is no “Asian CSR” model, but a set of nationally distinctive patterns of CSR behaviour, resulting from the national business systems, rather than development. Reflective of the impact of globalization on CSR, we found that companies operating internationally were more likely to adopt CSR than those operating only in their home country. One might expect that international exposure might lead to an increase in similarity of approaches across countries; however, we instead found that the CSR of the multinational companies operating in Asian countries tended to reflect their host rather than their home countries, reinforcing the national distinctiveness. However, this finding may be a little simplistic in the light of emerging tensions between international CSR approaches and host country experiences.

It is great to see that CSR in Asia has attracted a volume of research and we are delighted that our paper has been a reference point for some of this research.

Blog Editor’s note: The authors’ paper, “Corporate Social Responsibility (CSR) in Asia: A Seven Country Study of CSR Web Site Reporting” , is open access until December 31st 2022 as part of the journal’s 60th anniversary celebrations

About the Authors

Jeremy Moon is Professor at Copenhagen Business School, and Chair of Sustainability Governance Group. Jeremy has written widely about the rise, context, dynamics and impact of CSR.  He is particularly interested in corporations’ political roles and in the regulation of CSR and corporate sustainability. He is the Project Lead of the RISC research project.

Wendy Chapple is a full Professor of International Business and CSR at the Vienna University of Economics and Business (WU Vienna). She has played central roles in programme design and development, designing CSR related programmes and has been programme director for MSc and MBA programmes in CSR in the UK.  Wendy gained recognition for the development of faculty, programmes and research, by winning the Aspen Institute faculty pioneer award in 2008.  At WU, she will contribute CSR and Sustainability modules to the CEMs and undergraduate programmes.

Photo: Wikimedia Commons

Moving towards mandatory CSR – EU’s mandatory Human Rights Due Diligence proposal

By Johanna Jarvela

◦ 2 min read ◦

Last March European parliament gave a proposal to create mandatory Human Rights Due Diligence directive. The aim is to prevent human rights and environmental harm in a more efficient way, through regulation. The commission proposal is based on the UN Guiding Principles on Business and Human Rights and has three core elements: firstly, companies should themselves assess the risks of human rights violations in their supply chains, secondly, take action together with the stakeholders to address identified threats, and lastly – and most importantly – offer a system for access to remedy for those whose rights have been violated.  The commission is expected to give their resolution on the matter before Christmas, though the decision has been delayed already few times.

The EU proposal can be seen as a part of a continuum towards more mandated forms of corporate social responsibility (CSR). Traditionally CSR has been defined as something voluntary that companies do in addition to the letter of law in response to stakeholder pressures and societal expectations. At the level of individual organisations this has meant providing societal good through philanthropy and partnerships with NGOs or avoiding harm by improving the sustainability of business operations. Also, a great number industry level voluntary standards have been invented to solve the environmental and labour issues in transnational supply chains (Fair trade and Forest Stewardship Council being good examples). 

However, the past 20 years of voluntary measures have not been able to eliminate human rights violations in business operations. Indeed, it seems that voluntariness works for inspiring collaboration and innovating for better world.

In situations of wrongdoing, exploitation, and harm, stronger frameworks are needed to hold organizations accountable and offer remedy to victims. 

The recent development towards more mandated forms of corporate responsibility, like the French Due Diligence reporting Act or the UK Modern Slavery act, can be seen as efforts to respond to the accountability deficit. In June this year Germany passed a HRDD law stipulating that companies must identify risks of human rights violations in their supply chains and also take countermeasures. Also, Norway passed a similar law that requires companies to conduct human rights and decent work due diligence. Similar issues have been discussed in most of European governments.

There are caveats in creating this type of regulation. It might lead to tick-the-box type of exercises without true consideration for the human rights risk, burden companies if not given enough time and guidance to adjust, and transparency reporting does not seem to be enough to change business behaviour. One of the most difficult, yet most important, area in developing the new binding standards is the pillar three of UNGP: Access to Remedy. This pillar tries to ensure that in cases of violations, the victims will have a channel to make claims and receive remedy. Whether it should be civil or administrative liability or whether there should be an ombudsman in each country receiving complaints or via whistleblowing is all still in the air. What is clear is that whatever the final design of well-functioning HRDD system requires inputs and cooperation from businesses, civil society, and governments alike. Companies know best their supply chains, but sometimes NGOs may be a useful counterpart for identifying the risks and setting up stakeholder consultations. Finally, governments should be final proofers of the system ensuring accountability and enforcement. 

While some industry associations have raised concerns about the new regulations and the ability of European companies to oversee operations elsewhere, companies also evaluate that the new EU directive might level the playing field and give them a new tool in managing supply chains. Indeed, it seems that we are moving towards regulated CSR not only within EU but globally. UN has launched an intergovernmental working group to prepare a binding treaty on Business and Human Rights, there is an initiative for  minimum global corporate tax and efforts to close tax havens. More and more reporting is expected by companies, not only as increasing ESG reports to shareholders but more and more also as part of the mandatory legal requirements. 

Societal expectations are one of the key drivers for CSR. According to the latest polls it seems that European citizens and consumers expect the companies to upkeep good human rights and environmental standards within their global supply chains. 

About the Author

Johanna Järvelä,  is a postdoc researcher at Copenhagen Business School and member of the advisory committee for Human Rights Due Diligence Law in Finland. Her research focuses on the interplay of public and private governance in natural resource extraction and she’s especially interested in exploring how steer private sector towards providing societal good. 

Photo by Lan Nguyen on Unsplash

Are we asking the wrong questions in corporate social responsibility (CSR) research?

By Rikke Rønholt Albertsen

◦ 3 min read ◦

The sustainability contributions of business are under increased scrutiny in society. Observations of greenwashing, blue-washing, corporate hypocrisy, and decoupling suggest the existence of an intentional or unintentional gap between espoused CSR strategies and actual sustainability outcomes at the societal level. In other words, there seems to be more “talking” than “walking”.

This has inspired a growing concern in parts of the CSR research community that maybe we have been asking the wrong questions. Is it possible that in some ways we are contributing to this gap between strategy and impact?

Next year, an entire subtheme of the annual European Group for Organisational Studies (EGOS) conference will be dedicated to “Rethinking the Impact and Performance Implications of CSR”. This subtheme will address the tendency in CSR research to focus on outcomes at the organisational level without analysing impacts at the societal level.

There are valid reasons for limiting the scope of CSR research in this way: from an organisational performance perspective, many of the traditional success criteria for CSR policies—such as strengthening legitimacy, market position, and employee satisfaction—do not require data to be gathered on sustainability impact from a societal perspective.

However, the urgency and magnitude of the current global crisis related to climate, biodiversity, and social inequality fuels the expectation that corporations should acknowledge their role in creating these crises and take decisive action to be part of the solution. From this perspective, one would expect CSR research to provide knowledge of how, when, and why CSR policies and practices truly contribute to solving sustainability challenges. Yet, as a review of current CSR literature shows, this is rarely the case [1].

So what constrains CSR researchers from addressing this impact gap? In the following, I will highlight two interrelated mechanisms that have emerged from my research.

1) Sustainability impact is non-linear, systemic, and complex.

The problem with measuring sustainability impact is that it does not conform to conventional systems of measurement and reporting. Company CSR reports primarily provide key performance indicators linked to resource use per unit of production or list company policies and protocols to ensure compliance with various sustainability standards. In general, companies tend to (self) report on the successful implementation of their (self-imposed) CSR strategy, which happens to align with existing business objectives. However, as dryly noted by former environmental minister and EU commissioner Connie Hedegaard: the need for CO2 reductions is not relative; it is absolute! The melting Arctic poles do not really care that a company has made an effort to reduce its relative emissions if the net result is still more CO2 [2].

The negative impact on ecosystems is subject to irreversible tipping points where effects compound and accelerate. Thus, the societal impact of a sustainability policy or protocol cannot merely be assessed at the organizational level. It must be traced up and down the value chain and checked for unintended systemic consequences and hidden noncompliance [3]. Think of ineffective emission off-set schemes or families impoverished by bans on child labour. Ultimately, being “less bad” does not necessarily amount to being good.

2) Researchers do not have the necessary information.

Analysing the societal impact of corporate CSR policies and practices is a highly resource intensive task, which requires an entirely different set of research skills and data access than traditional organisational research. Instead, researchers most often opt to evaluate sustainability performance through estimations, perceptions, and narratives offered by company staff in surveys and interviews [1]. This data is context specific and prone to subjective biases, making it difficult to draw objective conclusions about societal impact.

Consequently, because there is so little existing knowledge of the link between CSR initiatives and societal impact, the CSR contribution of corporations is primarily assessed based on compliance with reporting standards and commercial rating initiatives such as the Dow Jones Sustainability Index [4]. This, for lack of better options, becomes the go-to objective indicator of CSR performance used by CSR researchers. Through this self-fulfilling circular logic, these indicators are used to identify CSR high performers for research on best practice. CSR research thus potentially perpetuates the perception of what successful CSR policies and practices look like—all without examining the societal impact of these practices.

Is this a problem?

Just as corporations increasingly realise that addressing CSR issues is no longer optional, we as CSR researchers may need to move beyond asking how, when, and why corporations engage with sustainability and begin asking how, when, and why corporations contribute to sustainability. If we do not, we risk losing our relevance when corporations look to academia for guidance on how to design and implement CSR strategies based on maximum impact rather than just maximum compliance and minimal risk.

We are challenged to expand our field of enquiry and be innovative when assessing how the observed means ultimately align with desired ends. This will require forging research alliances with new knowledge fields and establishing relationships with new groups of informants beyond company employees. The first step, however, is to rethink the questions we ask.

Further reading

[1] J.-P. Imbrogiano, “Contingency in Business Sustainability Research and in the Sustainability Service Industry: A Problematization and Research Agenda,” Organization & Environment.

[2] C. Hedegaard, “Farvel til ‘logofasen’ -nu har vi set nok grønne slides,” Berlingske, 2020. [Online].

[3] F. Wijen, “Means Versus Ends In Opaque Institutional Fields: Trading Off Compliance And Achievement In Sustainability Standard Adoption,” The Academy of Management review.

[4] M. Zimek and R. J. Baumgartner, “Corporate sustainability activities and sustainability performance of first and second order,” 18th European Roundtable on Sustainable Consumption and Production Conference (ERSCP 2017).

About the Author

Rikke Rønholt Albertsen is a PhD Fellow at the Department of Management, Society and Communication at Copenhagen Business School and a member of the multidisciplinary CBS Sustainability Centre. Her research focus is on exploring and understanding gaps between the espoused sustainability objectives of corporations, and their actual contribution to sustainability. She has a background in consulting at Implement Consulting Group and in sustainability advocacy as co-founder of Global goals World Cup. 

LinkedIn Profile.

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Why transparency may not lead straight to CSR paradise

By Dennis Schoeneborn

◦ 2 min read ◦

Business firms worldwide are increasingly engaging in practices of corporate social responsibility (CSR), a trend strongly driven also by the agenda of the UN Sustainable Development Goals. However, when doing CSR, firms tend to face recurrent suspicions by the media, NGOs, and other civil society actors that they would not put the money where their mouth is; in other words, that they would adopt CSR practices only ceremonially rather than substantially (a.k.a. “greenwashing”).

High transparency demands are commonly seen as the main ‘remedy’ that would ‘cure’ firms from mere ceremonial adoption and would drive them towards substantive adoption of CSR practices. However, in recent years we can find increasing evidence that high transparency demands do not always lead straight to CSR paradise. In a Financial Times article from 2020, Jason Mitchell raised the provocative question: Is greenwashing a necessary evil? The author argues that firms often require some leeway to experiment with CSR and sustainability practices to begin with, and without such leeway CSR efforts tend to get cut off too early by too high transparency demands and greenwashing accusations. After all, some decoupling between talk and action can also be due to a time lag between aspirations and the actual implementation of CSR practices within a firm (see here).

In the same context, Patrick Haack (HEC Lausanne), Dirk Martignoni (University of Lugano), and Dennis Schoeneborn (Copenhagen Business School) have recently published an article in the Academy of Management Review that draws on a computer-based simulation to study the dynamic interplay between transparency demands and CSR practice adoptions in a field or industry. By drawing on a probabilistic Markov chain model, the authors demonstrate that under certain conditions a regime of opacity followed by transparency (i.e. intially low and later high transparency demands) “outperforms” a regime of enduring transparency (i.e. high transparency demands right from the start) with regards to maximizing the share of firms in an industry that would adopt CSR practices in a substantive way. But what are such boundary conditions?

In the article, the authors explain that the optimality of the “opacity followed by transparency” regime tends to apply only for practices that are characterized by low adoption rates (i.e. those costly to implement) as well as by low abandonment rates (i.e. once adopted firms tend to stick with the practice, also since they may face public backlash if they abandon a practice after adoption). Interestingly, these are exactly the kinds of conditions that characterize CSR as a practice area.

What to learn from all this? NGOs and other civil society actors can benefit, in the long run, from cutting business firms some slack (i.e. putting rather low transparency demands onto firms), at least in the initial stages of CSR adoption processes. Instead, societal actors should then try to increase transparency demands at later stages in the adoption process to push firms further towards substantive adoption.

Haack et al. (2021) explain this process to work due to what they call a “bait-and-switch” mechanism of CSR practice adoption. Initially lower transparency demands allow for larger numbers of firms to adopt practices, even if they do so for ceremonial reasons to begin with. Importantly, when transparency demands are then increased over time, a number of firms tend to switch from ceremonial towards substantial adoption, thus leading eventually to the desirable outcome (from a societal viewpoint) of rather high rates of substantive CSR adopters in an industry. 

Further reading

Haack, P., Martignoni, D., & Schoeneborn, D. (2021). A bait-and-switch model of corporate social responsibility. Academy of Management Review, 46(3), 440-464. 

You can also access a (non-layouted) version of the same article at ResearchGate. The article has been picked up in a recent story by Forbes magazine. And if you want to learn more about the ‘backstory’ behind the AMR article, you can watch a video interview with two of the authors, Patrick Haack and Dennis Schoeneborn, on YouTube. 

About the author

Dennis Schoeneborn is a Professor of Communication, Organization and CSR at Copenhagen Business School and a Visiting Professor of Organization Studies at Leuphana University of Lüneburg. In his research, he focuses on organization theory, organizational communication, digital media and communication, corporate social responsibility and sustainability, as well as new forms of organizing.

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Like oil and water…. Shell’s climate responsibility and human rights

By Kristian Høyer Toft, PhD

◦ 4 min read ◦

In a landmark verdict at the district court in the Hague on 26th May this year, Royal Dutch Shell lost a case to the Dutch branch of ‘Friends of the Earth’, Milleudefensie, and other NGOs. The court ordered Shell to reduce CO2 emissions by 45% by 2030 against a 2019 baseline. The decision breaks new ground for the possibility of holding private corporations accountable for climate change – Shell-shocked and a Black Wednesday for the fossil fuel industry, according to expert commentators in international environmental law.

The verdict emphasizes the international consensus that corporations like Shell must respect basic human rights, such as the rights to life and family life. In the ruling, human rights are seen in the context of climate change and the aspirational 1.5-degree target stated in the Paris Agreement (2015), scientifically supported by the Intergovernmental Panel on Climate Change (IPCC 2018).

The verdict is a significant example of a general surge in climate litigation cases globally in which human rights are invoked.

Holding a fossil fuel company accountable based on the standard of human rights might sound as futile as the effort to mix oil and water.

And this sort of skepticism has roots in the recent history of attempts to connect business, human rights and climate change in what could be seen as a ‘bizarre triangle’ of irreconcilable corners.

However, the Shell verdict can be seen as a firm rebuttal to such skepticism. The court argued that Shell had violated the standard of care implicit in Dutch law. To clarify the content of the standard of care, the court used the United Nations Guiding Principles (UNGPs) which provide a global standard for businesses’ human rights responsibilities. This is, however, a bold interpretation in light of the UNGPs silence on human rights responsibilities with regard to climate change. 

In fact, human rights might not fit so neatly with the difficult case of climate change. Firstly, it is difficult to trace the causal links between the emitters and the victims of climate change, although this is contested by recent studies that have traced two-thirds of historical emissions to the big oil and gas companies, the so-called carbon majors.

Secondly, human rights basically apply only to the state’s duty to protect citizens, and thus only indirectly to private companies. This state-centric approach is core to the human rights regime and tradition, and the UNGPs uphold this by allocating less stringent responsibilities to non-state actors such as corporations.

However, the UNGPs also state that private companies have human rights responsibilities independently of the state. The district court in the Hague reaffirms this in its ruling against Shell, stating that corporate responsibility “exists independently of States’ abilities and/or willingness to fulfil their own human rights obligations, and does not diminish those obligations. [..] Therefore, it is not enough for companies to [..] follow the measures states take; they have an individual responsibility.” (4.4.13). 

A third source of skepticism resides in understandings of environmental law and the central role of the polluter pays principle. Accordingly, emitters are responsible for their historical output of CO2 as enshrined in the United Nations Framework Convention on Climate Change (UNFCCC 1992), but the scope is usually taken to be limited to the unit of production (scope 1), e.g. the refining of crude oil. The standard view of pollution is local, as for instance when a factory pollutes the local river. 

However, in the Shell ruling scopes 1, 2 and 3 are taken into account, meaning that consumers’ incineration also counts and therefore Shell must take responsibility for consumers’ emissions as well. The consequences of including all three scopes incur far-reaching and demanding responsibilities on corporations, where previously the distribution of responsibilities between producers and consumers has been disputed, for instance in the carbon majors case.

In sum, the Shell verdict raises the bar considerably for the expected level of corporate climate responsibility. The verdict also challenges the assumption that human rights don’t fit the complexity of climate change; though in fact the UNs first resolution on human rights and climate change appeared back in 2008. Moreover, the verdict goes against the widespread liberal assumption that businesses’ responsibilities are mainly to comply with the law of national jurisdictions and that consumers are comparably responsible for causing climate change. 

It might be time to rethink such assumptions and not simply continue ‘business as usual’ by seeing climate change and human rights-based climate litigation as a managerial risk factor to be handled instrumentally and in isolation from the moral duty to solve the climate crisis. 

One key lesson could be to acknowledge that corporate responsibilities are not just legal but moral as well, since the distinction is not so clear in soft law instruments like the UNGPs nor even in the notion of human rights themselves, not to mention the moral demands following from the need to respect and realize the targets of the Paris Agreement and related transition paths.

When the Special Representative to the United Nations on Business and Human Rights, John Ruggie, started exploring pathways for developing the field, he was inspired by the American philosopher Iris Marion Young whose ‘social connection model’ of global responsibility in supply chains suggests a forward-looking kind of responsibility for mitigating structural injustices. Young’s notion of responsibility was designed to solve large-scale structural problems like climate change by attributing responsibility to all agents according to their powers, privileges, collective capacities and level of complicity. 

This is the kind of thinking now supported in the court verdict against Shell, and it signals a new beginning where climate change reconfigures how corporations and human rights connect… perhaps making the ‘oil and water’ metaphor obsolete.

Acknowledgements

Among the many expert commentators, Annalisa Savaresi’s work provided particular inspiration for writing the blog. I am grateful to Florian Wettstein, Sara Seck, Marco Grasso, Ann E Mayer and Säde Hormio who all gave comments to my article ‘Climate change as a business and human rights issue’ published in the Business and Human Rights Journal (2020) 5(1), pp. 1-27. The blogpost is based on the approach of this article. Julie Murray was helpful with proofreading.

About the Author

Kristian Høyer Toft, PhD in Political Science, Aarhus University 2003. During 2020-21 a guest researcher at the CBS Sustainability Centre, Copenhagen Business School. His research focuses on corporate moral agency, political theory of the corporation and climate ethics and is published in Business and Human Rights Journal, Energy Research and Social Science, and in the book Corporate Responsibility and Political Philosophy: Exploring the Social Liberal Corporation (Routledge 2020). 

Photo by Irina Babina on Unsplash

Corporate democratic responsibility – messy and difficult, yet urgent and without alternative

By Dieter Zinnbauer

◦ 4 min read ◦

We live in politically tumultuous times. Authoritarianism is on the rise again across the world. Democratic freedoms have been in decline for 15 years in a row. The share of people living in free societies has shrunk to a meagre 14% of the world population. Meanwhile polarisation and populism, disinformation, mistrust and rising inequality have begun to hollow out the fundaments of even the strongest democracies. Votes for populist parties in mature democracies have risen from 3% in the 1970s to more than 20% today.

With democracy under attack everywhere how does and how should business position itself? What are the democratic responsibilities of companies? A tricky question well beyond the scope of a blog entry, but here some rather random notes and provocations on current trends and gyrations as input to this highly topical conversation.

Inaction is untenable, political neutrality unlikely.

It is less and less of a practical option anymore to hide behind a veneer of political neutrality no matter if rationalized instrumentally  (the Republicans-are-buying-sneakers-too argument), normatively (it’s undemocratic for business to engage in high stakes politics beyond its own narrow business interests) or intuitively (the empirically tenuous claim that business tends to only support moderate, mainstream politics anyway).  Here some reasons why:

For a start, it is not easy to find  real-world contexts, where a principled commitment to free and fair markets and a principled rejection of crony capitalism would not also imply and indeed be predicated upon a commitment to competitive democracy.  Or from a slightly different angle, the normative minimum for business – to respect human rights in its sphere of operation and influence –also entails respect for basic democratic rights and a related duty of care.

Remaining silent on democracy is therefore only an option as long as democracy is not in danger, as long as none of the substantive political forces in a country seek to actively dismantle load-bearing democratic norms and rules.

Yet in many countries this is not the case (any more). From Brazil to the Philippines from Poland or Hungary to the US, formally democratic regimes are under attack from within the political establishment. And in many more other countries fringe groups with dubious democratic credentials and intent often propelled by a toxic mix of populism and nativism are moving closer to becoming part of government. 

Enter corporate democratic responsibility

Corporate responsibility in such contexts entails having a plan for and executing on corporate democratic responsibility on at least three different levels / time horizons. 

  • For a start and most immediately it requires aligning non-market strategies with regard to corporate support for politicians, lobbying, public relations and other business and society interactions with an active stance and role in support of democracy.  E.g. no funding for politicians and parties that have taken to destroying basic tenets of inclusive political participation (not just temporary bans until the PR tempest calms down), no lobbing on issues that corrode the fundaments of political equality, an active promotion of democratic values, for example along the lines of campaigns by German business associations against extremism.
  • In the medium term it calls for a democracy audit – an active interrogation of one’s own operations’ “democracy footprint”, and how one’s business model can best respect, protect and promote democratic values. Big tech platforms, for example, are being pushed to better understand and address their role for a healthy democratic discourse. 
  • In long-term perspective it demands a deeper probing on how corporate conduct is linked to some of the underlying drivers of democratic decline and disillusionment. Growing inequality and declining social mobility, status anxiety and a profound sense of losing out and losing authorship of one’s life are all empirically confirmed to provide fertile ground for populism and creeping authoritarianism. To help restore a sense of individual economic and political efficacy, trust in societal fairness and public as well as private authority companies may wish to interrogate how practices around tax avoidance, regulatory arbitrage, shareholder primacy etc. intersect with these issues. This also includes questions around how reforms and new formats in corporate governance can help resurrect a sense of being in it together and revive the idea of the business organisation as a shared venture, an important venue for exercising citizenship and co-authoring one’s economic life world and, capable of collectively evolving  a strong, responsible corporate purpose.
A rough, but necessary ride ahead

Good corporate democratic responsibility does not come easy. It means wading into a messy terrain and facing up to the perennial tension between defending democracy and curtailing freedom. 

It involves business decisions on whether fitness-bikes should be permitted to spread rumours about voter fraud, whether couches and guest rooms should welcome riot tourists, whether rumour-mongers deserve cloud hosting or whether the president of the United States should be kicked off the world’s largest social network.  Yet, all these things need to be reckoned with one way or the other as doing-nothing only cements a status quo of what is often democratic backsliding.

All these tricky questions around corporate behaviour in the context of democratic countries that are at risk of backsliding will also bring into sharper relief the perennial question of what companies can and should do when operating in outright authoritarian settings – a discussion well beyond the scope of this short blog entry but one that is returning with a vengeance given high-growth prospects in authoritarian settings or military coups in popular foreign investment destinations.

Finally, an honest grappling with corporate democratic responsibility will be agnostic to partisanship in principle and approach. But it is highly likely to be partisan in outcomes. Political incivility and anti-democratic behaviour are unlikely to be evenly distributed across the ideological spectrum in any given setting. So brace yourself for a partisan backlash and for a constant tight-rope walk between supporting democracy and being drawn into day-to-day politics.  Getting this right will require the best of corporate strategy, corporate governance and corporate communication. But ultimately there is no escaping from corporate democratic responsibility. Flourishing economies and flourishing democracies ultimately depend on it.  

About the Author

Dieter Zinnbauer is a Marie-Skłodowska-Curie Fellow at CBS’ Department of Management, Society and Communication. His CBS research focuses on business as political actor in the context of big data, populism and “corporate purpose fatigue”.

Photo by Fred Moon on Unsplash

Unaccounted Risk: The Case of Sulfur Hexafluoride (SF6) in Offshore Wind Energy

By Esben Holst & Dr. Kristjan Jespersen

◦ 5 min read ◦

Carbon accounting provides a science-based measurement of greenhouse gas (GHG) emissions, achieving greater accountability of companies’ emissions causing global warming. GHGs are reported in CO2 equivalents (CO2e), meaning GHGs with widely different chemical qualities and environmental impact can be presented in a single understandable metric. However, the underlying methodology is debatable. This article questions whether the CO2e of Sulfur Hexafluoride (SF6) is misreported.

What is SF6 and why is it a hurdle for a green energy transition?

SF6 is used as an insulator in a wide variety of electrical equipment, mainly to prevent fires in incidents of short circuits. It is found in transformers inside windmills, offshore and onshore substations, and in power cables.

(Illustration to the left shows a sideview of a windmill turbine – Source: CAT-Engines. Right: an offshore wind energy system – Source: Nordsee One GmbH)

SF6 is a synthetic man-made GHG and cannot be reabsorbed naturally like CO2, meaning once emitted, it does irreversible damage. Most GHGs remain in the atmosphere around 100 years – SF6 remains for 3,200 years. These numbers are given by the Greenhouse Gas Protocol (GGP) based on calculations by the Intergovernmental Panel on Climate Change (IPCC). 

The IPCC’s metric Global Warming Potential (GWP), reveals environmental harm of a given GHG in CO2e. What then, makes SF6 problematic when converted into CO2e? SF6 has a GWP 23,500 times higher than CO2 – a value that is difficult to comprehend. The GWP metric is calculated using a 100-year timeframe based on GHG’s environmental harm. Yet, SF6 has an atmospheric lifetime of 3,200 years, essentially leaving 3,100 years of environmental harm unaccounted for. Using a simple logarithmic function incorporating IPCC data accounting for the missing 3,100 years, the GWP almost doubles. As illustrated below, this indicates how SF6 may be misrepresented in terms of environmental harm in CO2e emissions reporting.

As found by AGAGE – MIT & NASA, other worrying trends are observed. The atmospheric concentration of SF6 has more than doubled in the past 20 years. Luckily, its current concentration in the atmosphere remains low relative to other GHGs such as Methane or Nitrous Oxide.

Source: AGAGE

Regardless, the GWP of these two GHGs pales in comparison to the mindboggling detrimental effect of SF6 on the environment. Emitting this gas should therefore be strictly regulated.

Greenhouse Gas Emissions Reporting – Diverging Approaches

It only takes a little digging into offshore wind energy players to uncover diverging conversion methods of SF6 into CO2 equivalents (CO2e). The GHG emissions reporting methodologies of industry leaders use different emissions factors to convert SF6 into CO2e. An example of underreporting is illustrated by Vattenfall in their 2019 sustainability report, reporting SF6 as 15,000 times more potent than CO2. The emissions factor given by the GGP is 23,500. Ørsted uses a GGP emissions factor for the same gas in their 2019 ESG report. Yet, while Energinet also states it uses the GGP reporting framework in their 2020 CSR report, it uses an emissions factor of 22,800. The ownership distribution between Vattenfall and Ørsted in the Danish wind farm Horns Rev 1 of 40% and 60% respectively, thus blurs accountability and severity of reported emissions. As highlighted by the BBC, atmospheric concentration of SF6 is ten times the reported amount by countries. The IPCC and GGP are also aware of this.

During the past decade…actual SF6 emissions from developed countries are at least twice the reported values. (Fifth Assessment Report of the IPPC)

Measuring Impact of SF6 Leaks by Offshore Wind Players

SF6 emissions will rise exponentially alongside expanding electrified energy infrastructure using equipment containing this gas. This, together with repeated SF6 leaks, perpetuates the worryingly steep upward trend in atmospheric content of SF6 shown above. In 2020, Energinet reported a leak of 763.84kg SF6, or 17,950,240kg CO2e. The environmental impact of this leak is about the same as the emissions of 53 SpaceX rocket launches. Energinet has since admitted to years of underreporting of SF6, leading to amended SF6 emissions related to normal operations doubling.

Leaks of SF6 are too common. In Ørsted’s 2020 ESG report, a major leak at Asnæs Power Station was mentioned without disclosing the actual amount – withholding important risk-related data from investors. However, Energinet disclosed an SF6 leak of 527kg at that same facility in their 2020 CSR report. The leak for which Ørsted is responsible, yet feels is not material to disclose, is therefore potentially around 12,384,500kg CO2e. Indicating light at the end of the tunnel, Vestas has included SF6 on their Restricted Materials list since 2017, as well as introducing a take-back scheme for infrastructure containing this gas – setting a better example for business models of our green energy transition leaders.

Strengthening the Global Response to Climate Change Risk

It is vital that we understand SF6 is so detrimental to fighting climate change beyond 2100 that it has no place in sustainable business models today. Even if CO2 emissions are reduced in alignment with 2100 Paris Agreement goals, reporting in a 100-year timeframe will not save a planet billions of years old. GHG reporting must be better regulated and scrutinised in order to deliver a truly green energy transition. Releasing a gas causing irreversible damage cannot be an acceptable trade-off for a short-term “green” transition. While most company reports claim no alternatives exist, this is not true. Therefore, SF6-free equipment must be mandatorily installed.

A green transition goes beyond 2100, yet poor regulation enables energy companies to present SF6-CO2e favourably by using lower emission factors. Offshore wind energy players have not provided comparable, accountable, and transparent reporting – indicating stricter regulations on GHG reporting are necessary.

The Way Forward: Better Regulation

In 2014, an EU regulation banned the use of SF6 in all applications except energy after lobbyists argued no alternatives exist. The EU acknowledges the environmental harm of SF6, yet EU action has been described as inadequate. Asset managers, institutional and retail investors are exposed to hidden environmental risks related to SF6 in terms of double materiality. Double materiality referring to the financial costs related to management of SF6 incurred once completely banned. Non-financial reporting of GHG emissions and CO2e needs to be regulated far more than current global regulations. Investors, society, and most of all our environment deserves better protection.

NOTE: This article is based on a Copenhagen Business School (CBS) research paper in the course ‘ESG, Sustainable & Impact Investment’ taught by Kristjan Jespersen – Associate Professor at CBS – as part of the newly introduced Minor in ESG. The paper questions the greenness of wind energy by using the case of three large offshore wind energy farms in Denmark: Horns Rev 1 & 2 and Kriegers Flak. The findings are based on ESG, sustainability & annual reports from 2015-2019 of all involved OEMs, manufacturers, operators, and energy grid providers. Implications of the findings point to a coming hurdle within the electrification of a global green energy infrastructure transition. 

About the Authors

Esben Holst, an SDG and CSR research intern at Sustainify, is a Danish-Luxembourgish masters student at Copenhagen Business School. Besides attending the newly introduced Minor in ESG at CBS, his past studies focus on international business in Asia and business development studies.

Kristjan Jespersen is an Associate Professor at the Copenhagen Business School. He studies on the growing development and management of Ecosystem Services in developing countries. Within the field, Kristjan focuses his attention on the institutional legitimacy of such initiatives and the overall compensation tools used to ensure compliance.

Photo by Karyatid on Unsplash

Responsible to whom and for what?

Contestations of CSR across time, space, and experience … and a Call for Papers 

By Jeremy Moon

◦ 3 min read ◦

It is well known that globalization of business has thrown up a host of new governance challenges and new governance solutions. Conspicuous in this regard are the various ‘responsibility remedies’ for challenges posed in the supply chains of multinational corporations.

The growth and transformation of supply chains, particularly in agricultural products and garments has reflected a pattern of business expansion and penetration of host country markets. These have been followed by revelations of short-comings in the treatment of workers and communities, and in environmental responsibility. And in turn, these have been followed by responsibility remedies, often in the form of partnerships, international standards and multi-stakeholder initiatives.  

Formerly, if corporations were asked to whom they were socially responsible they might well have answered ‘to their communities’ or ‘to their stakeholders’. The concept of responsibility to communities makes sense in an industrial model of production in which the company, its management and workers are united not only by association with the company but also by the place in which the company had its most obvious impacts. The concept of responsibility to stakeholders is premised on its offer of an alternative to exclusive responsibility to shareholders, combining an ethical and a functional logic. But with global supply chains, the concepts of community and stakeholder responsibility are stretched.  In the former case this is to relationships with no face-to-face interaction or even common identity with place and culture. In the latter case it is to corporate relationships with workers who have no contractual relationship with the respective corporation, and may even be unaware that they are working in that corporation’s supply chain.

So we have witnessed numerous alternative models of supply chain responsibility often in the form of partnerships of businesses and civil society organizations, sometimes also involving local, national and international governments. The legitimacy of these partnerships, standards organizations and Multi-Stakeholder Initiatives (MSIs) is usually premised on some reference to, what are taken to be, universal principles, and on the plurality of participants, particularly those reflecting societal voice – ostensibly the surrogates of community and stakeholders.

But notwithstanding the legitimacy that these responsibility remedies initially attracted, research increasingly sheds doubts on their ability to resolve the responsibility question because they tend to obscure conceptions to whom and for what business is responsible for, and specifically by marginalizing representation from the global South – or the production-based economies of the supply chains.  

In my own work, I have seen tensions between host governments and international remedies for oppressive labour standards, with the former regarding such ostensibly well-intentioned initiatives as subversive to their own authority. There are tensions between host country suppliers and international brands and retailers with some of the former going out of business for not readily complying with new standards or complaining that they bear disproportionate costs of factory upgrading. And there are tensions experienced by workers whether with their own governments for regulatory failure, with their immediate employers for low wages and poor conditions, or with international supply chains which structure their livelihoods. But these tensions are often not articulated by virtue of the weak labour organization (often compounded by political environments hostile to organized labour). 

As a result from global South perspectives the new variants of the social responsibility model look ill-suited to the ‘on the ground’ economic, social and environmental challenges, at best. At worse, they look like a legitimization of a continuing model of exploitation.

A forthcoming special issue of the journal Human Relations, ‘Contesting Social Responsibilities of Business: Experiences in Context‘ is devoted to addressing such issues.  Core questions that the SI is designed to address include:

  • How do individuals, groups and communities from various geographic and geo-political contexts experience the imposition of social responsibilities and practices from businesses of all forms? 
  • How are social responsibilities and their related institutions and practices transformed, subverted and/or resisted within, across and outside of organizations and workplaces?

Moreover, the SI editors will also welcome papers on wider issues arising from the social responsibility of business, specifically to highlight perspectives borne of contextual experiences.  

A Special Issue workshop will be held on Thursday 16th September 2021 (applications by Monday 21st June 2021. To be considered for this special issue, full-length papers should be submitted through the journal’s online submission system between February 1st and 28th 2022.

For full details on the call, the workshop and the submission processes please follow this link.

About the Authors

Jeremy Moon is Professor at Copenhagen Business School, Chair of Sustainability Governance Group and Director of CBS Sustainability. Jeremy has written widely about the rise, context, dynamics and impact of CSR.  He is particularly interested in corporations’ political roles and in the regulation of CSR and corporate sustainability.

On behalf of the Guest Editors: Premilla D’Cruz, Nolywé Delannon, Lauren McCarthy, Arno Kourula, Jeremy Moon and Laura J. Spence; and the Human Relations Associate Editor: Jean-Pascal Gond.

Portfolios at risk of Deforestation

How can financial investors better understand underlying risks and act accordingly

By Amanda Wildhaber, Dominik Wingeier, Jessica Brügger, Nico Meier, and Dr. Kristjan Jespersen

◦ 4 min read ◦

Forests play a crucial role in tackling climate change and protecting biodiversity. Around 12 million hectares of tropical forest worldwide were lost in 2018 and approximately 17% of the loss stem from the Amazon alone. The main drivers of deforestations are soy, palm oil, cattle and timber production. As deforestation may harm a company’s reputation, directly affect its supply chains and increase regulatory risks, many institutional investors are concerned about the impact deforestation can have on their portfolio companies.

How can deforestation be measured?

The definition of deforestation risk from an investor’s perspective is difficult to lock-in because different frameworks and approaches focus on different aspects of the risks. The amount of information and the lack of transparency can be overwhelming to financial investors. Therefore, a helpful framework for financial institutions to systematically evaluate the deforestation risk management of portfolio companies has been developed. The framework is divided into two parts, an internal assessment of a company’s commitments and achievements regarding deforestation and an external assessment of outside policies related to deforestation, namely binding laws and private sector initiatives. The framework may serve to complete a scorecard which gives an overview of how well prepared a specific portfolio company is and if it is able to deal with deforestation risks and future regulatory changes. The final scorecard reflects the deforestation risk of financial institution’s portfolio companies.

Is voluntary support sufficient?

Many companies voluntarily support sustainability initiatives and follow zero deforestation commitments (ZDCs) to signal their intention to reduce deforestation associated with the commodities in their supply chain. The reasons behind their commitments include demonstrating corporate social responsibility (CSR), reducing the risk of potential reputational harm and supply chain disruptions. To understand the value of these commitments in mitigating deforestation and associated risks, it is important to critically analyse them in terms of their scope, effectiveness, monitoring and achievements. This includes for example, assessing how companies define deforestation and whether they systematically measure the compliance with their commitments.

External pressure to facilitate internal commitments

It is valuable to see companies implementing robust internal policies and commitments to manage and monitor their deforestation risk. However, it is also important to have external policies in place to hold companies accountable. There are two types of external policies the proposed framework is based on.

  1. The first type are binding laws which apply for portfolio companies and thus represent a regulatory risk. The EU Timber Regulation (EUTR) of 2010, which prohibits the sale of illegally logged wood in the EU, is one example for such a binding law.
  2. The second type are initiatives by third parties, which are of a non-binding nature and complement the binding law. One such initiative is the Roundtable for Sustainable Palm Oil (RSPO), which is an initiative by private companies as well as external parties targeted to eliminate unsustainable palm oil production.
How do the companies score?

Based on the assessment of the two pillars of the framework – internal and external – a scorecard is derived which assists investors to better understand how a portfolio company or a new potential investment is managing its deforestation risk. Answering questions with scores from 1 to 3, whereby 1 is the best score and 3 the worst, the proposed scorecard allows the quantification of the deforestation risk management of a company. While the distinction between 1, 2 or 3 is not always straightforward, the final score gives a tangible assessment of how well a company is positioned to manage its deforestation risks and associated future regulatory changes. The following scorecard provides an overview of the assessment and indicates how well Nestlé is managing deforestation risks.

Having such a scorecard allows investors to manage and mitigate the deforestation risks they face in their portfolios. In addition, the final scorecard enables investment analysts to directly compare potential investments with other companies and can be used as a parameter in the investment process.

The call for action is getting louder

New regulatory requirements, growing public scrutiny and extended private sector initiatives (such as the investor-led initiative Climate Action 100+), mean that it is becoming increasingly important to properly manage deforestation risks. This is also becoming a key concern for financial investors and it is time to think about systematic approaches on how to include deforestation into the investment process. The proposed framework is intended to serve as a starting point for just that. It allows a quantification of deforestation risk and the identification of critical factors. Building the basis upon which investors can engage with companies. This is a first step to support the mitigating of not only financial but also ecological risks.

About the Authors

Amanda Wildhaber is completing her masters in Economics at the University of St. Gallen. She works as a Junior Consultant in the Strategy team of Implement Consulting. Her interest in ESG and sustainable investments developed when she wrote her bachelor thesis on social enterprises in India.

Dominik Wingeier is studying master’s in Banking and Finance at University of St. Gallen. Dominik has been working for BlackRock where he was responsible for executing and monitoring primary, secondary and direct investments in infrastructure projects.

Jessica Brügger is studying master’s in Business Innovation at the University of St. Gallen. Jessica is currently a board member of the Private Equity & Venture Capital Club of the University of St. Gallen and is particularly interested in making the financial industry more attractive to women.

Nico Meier is studying master’s in Accounting an Finance at the University of St. Gallen. Nico has been working at BLR&Partners where he is responsible for private equity investments. Additionally, he has experience providing M&A, ECM and DCM services.

Kristjan Jespersen is an Associate Professor at the Copenhagen Business School. He studies on the growing development and management of Ecosystem Services in developing countries. Within the field, Kristjan focuses his attention on the institutional legitimacy of such initiatives and the overall compensation tools used to ensure compliance.

Source: photo by Justus Menke on Unsplash

Under the radar: How companies can redefine what we consider socially responsible

By Verena Girschik

◦ 2 min read ◦

Notwithstanding promises of win-wins and synergies, we have good reasons to question whether companies address social problems in society’s best interests. As many critics have pointed out, companies tend to promote solutions that foster their commercial interests – often without considering their broader social impact.

Do our suspicions stop them? Of course not. Companies are usually well aware of any concerns and continuously evaluate the risk of prompting a controversy around their social activities. When they don’t have the social license to operate, they simply cultivate relations with organizations that do and get them to act on their behalf. Using such relational strategies, companies’ efforts remain hidden from public scrutiny insofar as they operate under the radar. Smart!

It’s not quite that simple, however. Legitimate organizations such as NGOs are just as aware of those widespread suspicions, and they are therefore often reluctant to work with companies. Indeed, if an organization’s relations with companies are perceived to be inappropriate, the organization risks exacerbating concerns around corporate influence and may thereby jeopardize its legitimacy too. The widespread suspicions of companies’ intentions thus make it more difficult for companies to participate in social change. Let’s call this a legitimacy barrier. 

Overcoming the legitimacy barrier through relational work

How do companies overcome the legitimacy barrier and become legitimate actors in social change? In a recent publication (Girschik, 2020), I theorize how companies may engage in relational work to cultivate and shape their relations with legitimate organizations in such ways that redefine their involvement as socially responsible and thus legitimate. The paper details that companies can take four interdependent steps:

  1. Cultivating communal relations: As a first step, companies can form or strengthen personal relations with people who work for legitimate organizations and who are likely to be interested in addressing the social problem in question. On a personal rather than organizational level, it is easier to align and create a shared understanding of potential courses of action.
    
  2. Extending organizational support: Once a shared understanding is evolving, the company can start diligently targeting resources that enable the other organization to boost its activities and address the social problem. Such support has to happen on the organizational level to make sure that it is not considered for individual gain.
    
  3. Articulating a partnership: Because the second step produces salient practical outcomes and illustrates the benefits of corporate involvement, it opens a window of opportunity to formalize collaboration through a partnership agreement. As part of this agreement, the company can participate in defining not only further courses of action but also the company’s role.
    
  4. Differentiating as a socially responsible company: At this point, the company’s competitors have likely become interested and may try to imitate the company’s involvement by forming partnerships with the same or similar legitimate organizations. That’s a good thing for the first-moving company because it promotes the legitimacy of such partnerships. And benefiting from its strong relational embedding, the company is likely to outperform competitors through superior compliance with expectations. Being perceived as less sincere, competitors’ efforts are thus less strategically valuable and the first-moving company stands out as most socially responsible.

This process is time- and resource-consuming, but my study shows that it may pay off: it may enable companies to legitimate their involvement in social change while securing a competitive edge.

For better or worse?

These four steps explicate subtle yet consequential efforts through which companies may shape social change. The good news is that it is not easy and takes genuine long-term commitment. The bad news is that companies’ commercial interests may inform and mold trajectories of social change while their actual influence is hidden under a CSR veil. We need to keep deconstructing the relational constellations through which companies establish and exert their influence. 

Reference

Girschik, V. (2020). Managing Legitimacy in Business‐Driven Social Change: The Role of Relational Work. Journal of Management Studies, 57(4), 775-804.

About the authors

Verena Girschik is Assistant Professor of CSR, Communication, and Organization at Copenhagen Business School (Denmark). She adopts a communicative institutionalist perspective to understand how companies negotiate their roles and responsibilities, how they perform them, and with what consequences. Empirically, she is interested in activism in and around multinational companies and in business–humanitarian collaboration. Her research has been published in the Journal of Management Studies, Human Relations, Business & Society, and Critical Perspectives on International Business. She’s on Twitter: @verenacph

Source: photo by Kelly Sikkema on Unsplash

Who really cares about the SDGs when it comes to nobody’s responsibility?

By Suhyon Oh

◦ 2 min read ◦

The Sustainable Development Goals (SDGs) are the common goals of global development as we all agreed. Since its endorsement in 2015, it has become the norm. Multilateral corporations, aid agencies, development finance institutions and international organizations all refer to one or two Sustainable Development Goals (as their priorities) to legitimize environmental and social impact of their business activities. (I must confess here that I was also one of them). However, what are the actual changes in practices? Does it merely work as one other additional reference to our work? Otherwise, does it provoke transformational changes in our business strategies and practices for sustainability? Ironically, the Sustainable Development Goals are at once too sophisticated and too vague to do so.

The complexity of the goal structure should not be an excuse.  

The development process of SDGs has been grounded based on lessons learnt from the Millennium Development Goals. Because the MDGs excessively focus on the social aspect of development, the SDGs embrace economic, social, and environmental aspects. This led the number of goals to increase from 8 to 17. In relation to the goals, 169 target goals and 231 indicators have been developed to track the progress of 17 goals (In comparison, the MDGs only have 21 target goals and 60 indicators). These vast numbers intend to strengthen progress monitoring and enhance result management; however, such complexity seems problematic to fulfil the initial purpose. Some indicator selection processes are still under the technical review process after five years of SDGs have once passed and almost half of the indicators (106 out of 231) contain technical difficulties producing data on a regular basis to track the progress. I know that measuring the fulfillment of the whole massive SDGs is complex and may not be an easy task. However, when it comes to wrestling with such a giant, the sophisticated skill set (here, seeking clear target goals and indicators) would be a winning strategy rather than hurdles. Thus, how should we deal with the giant?  

 We have to consider which specific target goals and indicators are aligned with my actions if you have a will to achieve the SDGs. Simply stating one of the goals does not track your achievement. Each goal cannot be even drawn in parallel rather they are all interlinked.

Universality matters, but not everyone is in the same boat. 

We know why the SDGs have a principle of “No one left behind” across all the goals. This principle is again a result of lessons from the MDGs, which were criticized for the fact that they did not consider inequality and vulnerable groups in a development process. So that, this core principle is embedded into seventeen goals with the terms “inclusive”, “for everyone”, “for all” regardless of the developmental stage of their nations. Then, how can we make sure this would go far beyond the rhetoric?

We need extreme caution here. Do we have enough knowledge on those who are left behind? To move forward beyond the rhetoric, we need to unpack the word ‘everyone’. Even though ‘universality’ is an essential principle, we have to find out ‘who is left behind’ in every different context to make them not left behind, rather than concealing those excluded people under the name of “for everyone”.

Let’s see microfinance. It was expected as a universal means to reduce poverty and inequality since it provides a way of financial inclusion to those previously excluded to access credit. However, many research findings demonstrate that a particular type of “financial inclusion” which is embedded into microfinance cannot solve the marginalized groups’ economic challenges by itself. Without complementary social support, it was not enough to empower the poor, and even sometimes it resulted in an exacerbating situation for the people. I think this tells us the importance of deeper understanding of the poor, thus the need for a carefully targeted approach for impact. 

In brief, working for “everyone” requires additional attention and effort. Whose reality should count first? How could we guide us to hold clear accountability to turn the “No one behind” catchphrase into concrete actions? I believe one of the roles of research on the SGDs should be founded here.

SDGs as a norm: it should be embedded into everyone’s everyday life. 

Unlike the age of the MDGs, the SDGs involve a variety of actors such as private sectors and civil societies, who were not officially a part of the MDG process. Various stakeholders can create synergy through cooperation, but the responsibility to fulfil the SDGs become vague. According to Jurkovich (2019), three essential elements are needed to become a norm: “a moral sense of “oughtness”; a defined actor “of a given identity”; a specific behaviour or action expected of that given actor”. The SDGs as a global norm neither identify relevant actors for each specific goal and indicator nor have a compliance mechanism.

Sadly, the SDGs do not assign the responsibilities to anybody and the technical difficulty to monitor them also implies oughtness can be weakened. Frankly speaking, we officially have no obligation to contribute to the SDGs. 

Despite its non-obligatory identity, I strongly believe that most of us have a willingness to dedicate to the SDGs. Although we all understand its complexity of monitoring, ambiguity of target people and non-compliance mechanisms. I urge you as an individual, a scholar or a member of the whole global development community to carefully consider what goals/target goals/indicators and for whom I can contribute with a strong responsibility. Otherwise, the SDGs risk losing its political power and may be on track to decay its status as the norm before its completion in 2030.

About the Author

Suhyon Oh is a PhD fellow at the Department of Management, Society and Communication, Copenhagen Business School, and has over ten years of professional experience working with the donor agency, international organizations, development consultancy, NGOs as well as private sectors. As an international development expert, she has worked with the projects on development finance, financial inclusion and global value chain development, etc. Her current research interest is development finance institutions, impact investing funds in developing countries, hybrid organization strategy and strategy as practice.  

Is Pollution the Only Road to Business Prosperity?

Sustainable Visioning as a driver of Corporate Transformation

By Heather Louise Madsen

◦ 4 min read ◦

CO2 reduction is a hot topic for almost every company today. Here the focus is not just on the CO2 generated by the company itself, but also on the carbon emitted along its value chain. The problem is that changing processes, or even products and services, to make them more environmentally friendly can be a daunting and costly task. This can leave CEOs and other top managers wondering what the real cost and impact of CO2 reduction is, where to start, and whether it is even possible to create a prosperous business without generating pollution.

In answer to many of these tough questions, an increasing number of companies are succeeding in reducing carbon and completely transforming their businesses into sustainable and profitable powerhouses, using a combination of strategic vision and sustainability orientation.

A new CEO for a Company Topping the Sustainability Ranking Charts

January 1st, 2021 was Mads Nipper’s first day as CEO of the Sustainable Energy Giant Ørsted. And before the end of his first month in this new position, Ørsted ranked the most sustainable energy company for the third year in a row, and the second most sustainable company in the world after Schneider Electric. This raises the question, what is Nipper’s position on sustainability,  and are these views important for his role as CEO of Ørsted?  

In 2016, as the then CEO of Grundfos, Mads Nipper gave a presentation for the Global Compact Leaders Summit in New York where he stated: “I represent an SDG 6 and 13 company, who also happens to be the biggest water pump company in the world.” The UN Sustainable Development Goals (SDGs), representing a global platform and common language for addressing 17 core sustainability issues and their impact, also figure prominently in Ørsted’s corporate language. From Annual Reports to investor letters, Ørsted identifies SDG 7 (energy) and SDG 13 (climate action) as their primary impact areas. This indicates that there may be some very fundamental alignment between Nipper’s visionary statement and the mindset of his predecessors at Ørsted.

What led Ørsted to up-end their core business and undertake a sustainable transformation?

In 2001, Ørsted (then DONG Energy) hired CEO Anders Eldrup, just as Denmark was going through a liberalization of the electricity and gas sectors, which was putting extreme financial pressure on the company. Eldrup was the former Danish Secretary of State, and as such had extensive experience with both financial and political mechanisms. Seeing an opportunity to take advantage of an emerging political demand for climate action and policies to accelerate the development of offshore wind, Eldrup began increasingly to focus innovation resources on offshore wind and renewable energy, while the primary business of the company remained oil and gas. As renewable energy subsidy schemes increased in Denmark and the EU in the years that followed, Eldrup formulated a new company strategy that was released in 2009 called 85/15: “to transform our company from a situation of 15% renewable energy and 85% of fossil-fuel based energy to the opposite”. Jakob Askou Bøss, Head of Strategy and Communication at Ørsted, identified the strategic analysis of CEO Anders Eldrup as “The driving force behind formulating the new vision of the company,“ referring to the 85/15 objectives.

Despite the sacrifices that would need to be made as the core competencies of the company would have to be completely re-designed and transformed to focus on not-yet price competitive technology, the decision had been made. And this strategy was then further anchored to sustainability with Ørsted’s vision: “creating a world that runs entirely on green energy”. This vision made explicit the desire to reach outside of the organization with their “green” aspirations, connecting not only to ideals of wealth and prosperity, but also to planetary concerns.

These ‘green aspirations’ were then followed up by Eldrup’s successor Henrik Poulsen, who became Ørsted’s CEO in 2012. As stated by Poulsen:

“In the world of energy, the fundamental challenge we face is to transform our energy systems so that more and more of the energy we generate comes from renewable sources such as wind power, biomass and solar energy.”

Ørsted, Our sustainability reports, 2012, DONG Energy’s GRI Reporting 2012  

Poulsen then backed these aspirations by setting very specific targets for the company including “quadrupling our offshore wind capacity, from 1.7 GW in 2012 to 6.5 GW in 2020“. By 2017 Ørsted had completely divested all upstream oil and gas. This was also the year that newly built offshore wind became cheaper than black energy for the first time in history. By the time Ørsted reached 2020, the company was ranked number 1 of more than 7500 international, billion-dollar companies in the Corporate Knights’ 2020 index of the Global 100 Most Sustainable Corporations in the World, making Ørsted the most sustainable energy company in the Global 100 index. As demonstrated by Ørsted, strategic vision and sustainability orientation were used as drivers for innovation, transformation  and growing the company’s sustainable business and investment portfolio. But how can Ørsted’s story help other businesses? The answer lies in sustainable visioning. 

How can sustainable visioning help businesses onto a path of prosperity AND sustainability? 

Sustainable Visioning is a new term defining the management process of combining a strong strategic vision with the acknowledgement of the necessity of committing more profoundly to people, planet and prosperity concerns.

Madsen & Ulhøi, 2021

The following are guiding principals of sustainable visioning that Ørsted can be seen as applying, and which may be able to help other companies onto a similar path. First, in order for businesses to achieve sustainable visioning, they need to practice proactive, extroverted and visionary, rather than introverted approaches to sustainability. When working on sustainable innovations, it can also be wise to engage the Tripple Helix model including industry, universities and government working together. Innovation can also be usefully extended beyond products and services, to include business model innovation. This can help to navigate to a desirable sustainable future through direct planning, decisions, actions and behavior in all aspects of the business. And finally, taking a clear long-term orientation is also seen as important for sustainable visioning to be successful. 

In practice, following these key guiding principals of sustainable visioning may make it more likely to effectively link strategic visioning to long-term sustainability objectives, providing the necessary support for corporate growth and innovation needed to ensure a successful transformation.

Further Reading

Madsen, H.L., Ulhøi, J.P. 2021. Sustainable visioning: Re-framing strategic vision to enable a sustainable corporate transformation. J. Clean. Prod. 228.

About the Author

Heather Louise Madsen, Ph.D. is the PRME Strategy Manager at Copenhagen Business School, and has over ten years of professional experience working with sustainability. As a sustainability expert, she has worked with the organizational implementation of the UN SDGs in the private sector, and has extensive experience working with CSR, the UN Global Compact, carbon footprint reporting and social, environmental and economic sustainability. Heather is dedicated to topics of innovation, strategy, business transformation, organizational learning, business model innovation, renewable energy and sustainability.

Sustainable livelihoods? The informal sector beyond Covid-19

By Søren Jeppesen

As a number of the CBS Sustainability blogs have mentioned since March 2020, the official reactions to Covid-19 have (so far) not been doing much for sustainable development (apart from lower CO2 emissions from air travel). Despite concerned voices criticizing the limited attention to combating climate change (‘environmental sustainability’) in the longer run, little impact on policy makers has been registered.

If we focus on ‘social sustainability’ the picture is similar. Discussing the social side of sustainability is part and parcel of assessing the situation in the informal sector and among the estimated two billion people reliant on their livelihoods through the informal activities across the Globe. Sadly, the situation has shown that this group of people and their families have suffered from the imposed restrictions due to Covid-19 (see here).

While the negative impact on income and livelihoods probably is the most severe consequence of inability, lack of willingness (and in some cases maybe even sheer ignorance) among authorities, the events since March can also be viewed ‘an opportunity missed’ regarding (more) sustainable practices.

The classical example is waste handling where informal workers (or scavengers) are involved in waste collection, sorting and identifying material for recycling and reuse. The Indian system where almost all component of waste are sorted and reused is well-known. But additional examples are found in areas like minimizing food waste and establishing social safety nets (Tucker and Anantharaman, 2020). Had governments appreciated the role of the informal sector and the activities undertaken, the period since March could have been used to change towards a ‘sustainability footprint’.

So, instead of using the (unfortunate) challenge to aim for positive change why have governments then been so keen to do the opposite and merely lockdown the informal sector (including denying poor people of their meagre livelihoods)? As Tucker and Anantharaman (2020) argue, it might be due to informal work being perceived as a ‘deficit’ (lack of contracts, lack of permits, lack of tax payment, lack of this and lack of that). International organisations like ILO have long been arguing in favor of ‘formalization of the informal’ (ILO, 2019). And not to romantize the informal sector, nevertheless it is intriguing that this is and has not been a sector perceived as ‘creative, agile, flexible’ and all the buzz that the present glorification of the private sector and individual initiative otherwise has been marked by.

Now, we can’t change what have been the typical type of reactions to the Covid-19 situation across the globe, but we do note that we have increasing social challenges ahead due to rising poverty levels, the naïve, optimistic wish for the New Year is that attention will be placed on how to engage the informal sector and all its resources in the strive for a more sustainable development path. It will not only open up the Pandora’s box regarding new and valuable ways on dealing with the Global trajectories, but could provide avenues for the informal sector to be reckoned as ‘a contributor’ (instead of ‘a deficit’).

References:

CGAP, 2020. Covid-19 Briefing. Insights for Inclusive Finance. Relief for Informal Workers: Falling through the Cracks in the COVID-19 Crisis. August.

ILO . International Labour Organization; 2019. Work for a Brighter Future. Geneva.

Tucker, J.L. and Anantharaman, M. 2020, Informal Work and Sustainable Cities: From Formalization to Reparation, One Earth. 2020 Sep 18; 3(3): 290–299. (doi: 10.1016/j.oneear.2020.08.012)

About the Author

Søren Jeppesen is Associate Professor at the Department of Management, Society and Communication at Copenhagen Business School. His research concerns the development of firms in developing countries. He focuses on SMEs, CSR and driving forces (or lack of same) for strategies of SMEs in developing countries in engaging in CSR (or not engaging).

Photo by The Ian on Unsplash

Friedman’s critique of CSR at 50: birthday surprises

By Jeremy Moon

Sorry I am late in sending a 50th birthday card for Milton Friedman’s essay “The Social Responsibility of Business Is to Increase Its Profits [1]. Many would say that it is a birthday not worth celebrating. I agree with my colleagues Steen Vallentin (see blog) and Sandra Waddock (see blog) that we should move beyond Friedman’s assumptions and prescriptions. So why do I use a seemingly outdated newspaper article in my introductions to courses on corporate social responsibility (CSR)? In Steen’s terms, should I continue to flog the ‘somewhat dead horse’? As I think this horse still has legs I wouldn’t flog it, but I would continue to take some of the CSR journey with it. And here’s why. 

By reading and thinking about “The Social Responsibility of Business Is to Increase Its Profits” students have gained insights into how business and its context changes, and into some key abiding issues (e.g. the relationship of business responsibility to government, the purpose of business). Friedman packs an awful lot into the essay. Despite my belief that it is anachronistic and misguided in parts, Friedman – sometimes unwittingly – brings a few interesting surprises to the class.

Surprise No. 1 is that it was even worth penning a critique of business social responsibility in 1970. It is sometimes assumed – especially in business schools – that business concerns with responsibility and sustainability are relatively new fads (the sad truth is that many schools have been slow to address these concerns). But, yes, there was a lot of talk about CSR in the late 1960s USA, and Friedman castigates GM Motors for its social initiatives. So CSR is not new but it has its ups and downs. Its focal issues, modes and rationales differ over time and vary among contexts.  

The biggest change to CSR since 1970 is probably globalization bringing with it global supply chains and new corporate agendas of responsibility for labour & human rights and for the natural environment. Friedman envisaged that the only governments relevant for social issues were democratically accountable (i.e. American) and thus did not envisage the difficult responsibility issues for corporations in sourcing from, and selling to, countries which are undemocratically and corruptly governed. 

Surprise No. 2 is for those who know that Milton Friedman had already achieved fame or infamy for his libertarian position. In his book Capitalism and Freedom (1962), he presented government as inefficient and ineffective on key public policy issues. As Sandra Waddock points out, neo-liberalism, of which Friedman is a standard-bearer, generally contends that ‘less government is invariably good’. Yet in “The Social Responsibility of Business” Friedman is positive about government as an accountable and competent actor for resolving societal problems.

Friedman suggests a dichotomous view of the responsibilities of government and business because he assumed that business could best pursue its responsibilities – to increase profits – unencumbered by public policy obligations, and that government could legitimately raise taxes to address social issues. But this dichotomy rather belies the realities, then and now, of business organizations seeking favorable governmental intervention in markets and society… and of governments seeking business contributions to addressing societal challenges.

Surprise No. 3: Friedman acknowledges the virtue of social investments by business … ‘excuse me?’. Yes. In a rather over-looked passage, he comments that: 

It may well be in the long-run interest of a corporation that is a major employer in a small community to devote resources to providing amenities to that community or to improving its government. That may make it easier to attract desirable employees …or have other worthwhile effects.

M. Friedman (1970). “The Social Responsibility of Business Is to Increase Its Profits”, p. 124 col. 3.

This looks like an early version of the business case for CSR – re-labeled Creating Shared Value by Porter & Kramer [2]? But Friedman just doesn’t want you to call social investments CSR. Like today’s critics of CSR, Friedman sees this cloaking of a business strategy as a form of “window-dressing” and as “approaching fraud”. This introduces the fascinating point of class discussion about whether something can be described as socially responsible if it also benefits the benefactor, and specifically the corporate benefactor?

Surprise No. 4 is for students of business and management.  It lies in Friedman’s misrepresentation of corporate governance. His main argument about CSR constituting misuse or even theft of shareholders’ property is predicated on his contention that shareholders are the legal owners of publicly traded corporations. But in fact the corporation itself owns its assets: indeed the whole point about limited liability is that shareholders are exempted from liabilities that would otherwise rest on owners [3]. Of course, there are duties to shareholders – legal and ethical – but these are tempered in corporate governance regulation and judicial rulings (details vary among jurisdictions).

This is also a surprise for some corporate critics who see the problem of corporate irresponsibility as simply a function of a shareholder model [4].  In other words, they believe Friedman’s myth of the managers simply being the agents of shareholders. That this myth has achieved such standing is, perhaps partly testimony to the appeal that Friedman’s argument has had… and another reason why I like to introduce him to students.  

Surprise No. 5 is one that, in retrospect, Friedman himself may have had to face. It is clear that investors do not conform to his fairly unidimensional assumptions of shareholders’ motivation: not all are interested in short-term profit. Some are motivated by long-term security of their investment and others by values (e.g. avoidance of risky products, preference for products not tested on animals). Today we see evidence of greater mainstreaming of investor concerns with sustainability issues that Friedman would have contended are beyond corporate responsibility and which are properly in the sphere of government (see Rasche blog).  

Of course, much else has changed which students like to ponder, including:

  1. the extent to which corporations adopt the business case for responsible and sustainable goods and services, be it for their own sake, or reflecting changing consumer, employee or investor preferences or, more broadly, reflecting their understanding of the expectations of societies and regulators.
  2. the institutionalization of CSR through private authority (principles, standards, audits, reports) and its intersection with civil society and democratic government.
  3. skepticism about corporate motivation for “promoting desirable social ends” is no longer the sole prerogative of libertarians like Friedman (and Hayek).  I now also comes from the very socialist perspectives that Friedman feared the most.

So yes, we certainly need to move on, but we may move on more assuredly if part of our journey (on horseback or otherwise) is engaged in the conversation he spurred (sorry for flogging these equine metaphors…). 

References

[1] M. Friedman “The Social Responsibility of Business Is to Increase Its Profits”, New York Times Magazine, 13 September 1970.

[2] M. Porter & M. Kramer “Creating Shared Value”  Harvard Business Review, Jan  – Feb 2011.

[3] E.g. Lynn A. Stout. The Shareholder Value Myth: How Putting Shareholders First Harms Investors, Corporations, and the Public, 2012.

[4] E.g. Not Fit-for-Purpose: The Grand Experiment of Multi-Stakeholder Initiatives in Corporate Accountability, Human Rights and Global Governance (Summary Report), MSI Integrity, 2020.

About the Author

Jeremy Moon is Professor at Copenhagen Business School, Chair of Sustainability Governance Group and Director of CBS Sustainability. Jeremy has written widely about the rise, context, dynamics and impact of CSR.  He is particularly interested in corporations’ political roles and in the regulation of CSR and corporate sustainability.

Photo Source: Milton Friedman blowing out the candles on his birthday cake, while his wife Rose and other party attendees look on. 15 July 1987. ©Hoover Institution Archives.

Top Leadership Compensation: From Hockey-Stick to Shared Pay-checks

“Sharing is Caring” is a way to manage post-COVID19 Economic Crises and Layoffs

By Anirudh Agrawal & Bharat Dhamani

10 of the 25 Linkedin review of best companies to work in India published in 2019 are firing their employees in 2020.  They paid huge performance based salary to top management, who drove performance by reducing pay of the lower rung employees [1].

There is a moral dilemma when we compare top management compensation with those employed at the lower levels or those employed on temporary contracts in India Inc. The median top management salary in India is as much as 243 times than those at the lowest strata of the organisation [2]. During the recent Covid-19 crises, this wage asymmetry between the lowest rung employees and top management the resulting crises of legitimacy were further highlighted. This opinion piece discusses three strategies to control hockey stick pay-outs to the corporate leadership. Contrary to current narrative on free market  and invisible hand, the corporate must self-reflect and implement policies for greater employee rights and dignity, collective bargaining and equality of pay to create  sustainable competitive advantage. 

India Inc. must learn from Scandinavian enterprises about their top leadership compensation model where the compensation is decided collectively ( along with the employee union), ensuring fairer pay and shared accountability towards organizational performance. Scandinavian strategy of collective bargaining has ensured multiple benefits [3].

  1. It has ensured that the rights of the lowest-ranked individual is protected.
  2. It has ensured that organizations follow sustainable policies both internally and externally, keep sharing the impact from shareholders to stakeholders, and
  3. The employees at each level and the communities work in sync towards ensuring organisational mission and competitiveness politics, cliques and influence of personal interest groups are limited.
  4. The collective agreements ensure that the employee flights to competitors are limited.

The effect of Scandinavian model has ensured an overall positive impact on organisational longevity, brand recall and competitiveness [4].

The India Inc should engage with their Indian public sector counterparts and learn their functioning and how they treat their employees through fairer pay and work conditions. India Inc should reflect and study the pay structure adopted by the Indian Public sector [5].

The public sector salaries have ensured respect for each, preservation of rights, longevity in the job and service to all irrespective of caste, colour or religion.

For example, the public sector banks like SBI ensure delivery of financial services to the poorest of the poor while ensuring that its banking officials are paid well. Our common sense would suggest that the Indian private sector to emulate some of the public sector compensation methodology, ensuring that the employee at the lowest strata get decent wages. The private sector can learn from the public sector on how to manage organisational compensation and increase organisational loyalty and in doing so, it must also increase benefits to the lowest ranking employee in the organisation. Similarly, the public sector should develop agility to reflect on market forces and learn to innovate to ensure that it is aligned and competitive as the competition demands. 

Narayan Murthy of Infosys rightly questioned his senior management about the lack of accountability despite hockey stick payouts. He pointed out that shareholders might approve the actions of the top management but the corporate leadership must be accountable to the stakeholders that includes the public and the employees [6]. 

Therefore, top management compensation should be duly decided by following a strong corporate governance principles, transparency and by installing elements of corporate ombudsman. 

Firms with strong accountability and stakeholder interests would perform better in the long run, than those firms which are driven by offering high incentives to top management for performance.

Some Indian private sector organisations belonging to distressed industries and markets had taken large public owned capital to run their businesses, paid hefty compensation to higher management but when things went wrong, both the promoters and top management had no public accountability. Besides, when the business failed to perform, the top management were just let go while the lower-ranked employees struggled to pay their bills. The audit reports were hardly made public and the accountability measures and corporate governance rules of such organisations were never questioned.  

The organisations while deciding top management compensation must also bring proportionality in accountability and stakeholder engagement.

Collective bargaining, equality in pay similar to public sector and corporate social and moral accountability are three strategies that the Indian corporations must reflect and incorporate in their managerial processes. Some of the NIFTY fifty Indian corporations like the Tata Group, Infosys, Mahindra and Mahindra, Hero Motors, ICICI Bank have implemented in their processes and one can see these effects on the employee satisfaction on Glassdoor employer ratings, brand recall by the consumers and overall stakeholder satisfaction is reflected positively.

Therefore, if the Indian private sector implements the policies that lead to greater accountability, equality in pay, collective decision making while ensuring its flexibility to market forces, we will see a disruptive and positive change in the image, governance mechanism, competitiveness and longevity of Indian corporations.

While the hockey stick model of compensation shifts the responsibility entirely on the top management, the collective bargaining and equitable compensation distributes the responsibility to each and every employee, bringing greater sense of employee engagement and employee accountability. Such a strategy has a potential to create long term competitiveness and shareholder value.

References

[1] https://www.businessinsider.in/here-are-the-25-most-popular-workplaces-in-india-according-to-linkedin/articleshow/68704338.cms
[2] https://economictimes.indiatimes.com/news/company/corporate-trends/india-incs-top-executives-earn-243-times-more-than-average-staff/articleshow/63359591.cms
[3] https://www.socialeurope.eu/why-trade-unions-at-work-do-work
[4] http://norden.diva-portal.org/smash/get/diva2:816030/FULLTEXT02.pdf
[5] https://www.spjimr.org/blog/learning-public-sector
[6] https://www.hindustantimes.com/india-news/narayan-murthy-recounts-his-spat-with-vishal-sikka-to-drive-home-point/story-YNG126VbaGMO5nDgFx0XCM.html

About the Authors

Anirudh Agrawal is Impact Investing and Social Entrepreneurship Fellow at Copenhagen Business School and Lecturer of Entrepreneurship and Strategy at Department of Entrepreneurship at FLAME University India. He is researching on the institutional theory framework to reflect on debates in social entrepreneurship and social innovation. 

Bharat Dhamani is a Lecturer of Entrepreneurship and Strategy at the Department of Entrepreneurship at FLAME University India. He practices engagement oriented learning through simulation and practical work. His subjects include financial management, business plan preparation, new venture business strategy and social entrepreneurship.

Photo by Sharon McCutcheon on Unsplash

Making the case for and against and beyond Friedman in 2020

On the anniversary of Friedman’s “The Social Responsibility of Business Is to Increase Its Profits”

By Steen Vallentin

September 13th marked the 50th anniversary of the publication of Milton Friedman’s famous New York Time Magazine essay entitled “The Social Responsibility of Business Is to Increase Its Profits”. This has occasioned a slew of testimonials and opinion pieces on Friedman’s legacy in general and the legacy of this free market manifesto in particular. 

Not surprisingly, the tone of testimonials have differed. From those lamenting Friedman’s enormous influence on the discipline of economics, economic policy, modern business and finance over the last three to four decades in particular, to those celebrating these very same developments. One commentator, in The New York Times, speaks of how a generation of C.E.O.s have been brainwashed to believe that the only businesses of business is business. That the sole responsibility of business is to make money. 

Dwindling relevance

Anti-Friedman sentiment, and this is nothing new, takes aim at the single-mindedness and moral blind spots of free market capitalism, market fundamentalism, the shareholder paradigm, finance capitalism, you name it.

Indeed, ‘Friedman was wrong’ was for many years a recurrent theme in arguments made in support of CSR and stakeholder capitalism. But Friedman is not as relevant as he used to be.

In recent years, as far as specialized discussions of CSR go, the Friedman doctrine has increasingly been displaced by ‘the Porter doctrine’, that is, the strategic view of business responsibilities promoted by renowned, now retired, Harvard Business School professor Michael Porter along with Mark Kramer.

Porter & Kramer’s more accommodating brand of economic instrumentalism – encapsulated in the influential notion of Creating Shared Value (CSV) – has turned out to be much better attuned to present circumstances than the message of Friedman’s antagonistic and polarizing opinion piece.

The critique of free market capitalism has arguably gained urgency and currency with the climate crisis and calls for sustainable development and green transition. This is not to say that the Friedman doctrine has been abandoned by all those who used to support it.

However, given the opportunity to reflect, supporters of Friedman tend not to dwell much on the minutiae of the 1970 essay.

The devil is in the detail, and few seem to be willing to argue that what Friedman wrote 50 years ago is a proper representation of how the problem of corporate social responsibility is constituted in the year 2020.

The strength of Friedman’s wonkish essay was always its crude simplicity. For many years it seemed to encapsulate everything that needed to be said about CSR – according to mainstream economists and ideologues of a similar persuasion and the discipline of neoclassical economics. In other words, very little needed to be said. 3000 words were enough.  

However, with the rise of ESG and sustainable finance it seems to be dawning even on the disciplines of economics and finance that more indeed needs to be said – and that the crudeness of Friedman falls terribly short in capturing the challenges, risks and opportunities ahead.

Friedman’s article has served as a moral cornerstone for the shareholder value paradigm. Its moral shortcomings are increasingly showing, though.

The Friedman doctrine nonetheless

What supporters of the Friedman doctrine nevertheless argue, is that he was (and is) right about fundamentals: that the shareholder value paradigm is a superior economic principle and form of governance. The argumentative support structure for this paradigm does, however, need adjustment in order to achieve better alignment with changing historical conditions, opinion climates, societal norms and expectations.

In other words, supporters of shareholder capitalism need to fight for their cause. They need to renew their engagement in the ongoing ‘battle of ideas’ over business and society.

Their main opponent in this battle is well-known, but has been gaining new and more widespread support as of late. The opponent is stakeholder capitalism, the virtues of which have found high-level affirmation recently in the Davos Manifesto of 2020 and in the Business Roundtable statement on the purpose of business from 2019. 

Importantly, the American brands of stakeholder and shareholder capitalism have a common denominator. Both Friedman and R. Edward Freeman (the great popularizer of stakeholder thinking) have described themselves as libertarians. Stakeholder capitalism, US-style, begins and ends with voluntary initiatives and stakeholder engagement by business. Government and regulation are not supposed to have central roles to play in such endeavors. They are supposed to work better, more smoothly and efficiently without government interference. 

Thus, the first line of battle – for Friedman supporters – has to do with regulatory failure. Sure, there are market failures that we need to take account of when assessing the responsibilities of business. But regulatory failure should be no less of a concern. 

The second line of battle has to do with principles and practices of governance. According to its supporters:

Stakeholder capitalism is supposed to be more open, democratic, responsive and responsible than its counterpart. But what does stakeholder governance mean in practice, at the corporate level, unchecked by government regulation and without agreed upon rules of engagement? It is far from clear. 

Will it ultimately be good for business and society if companies are governed in accordance with the diffuse model and principles of ‘stakeholderism’? It is equally well imaginable that stakeholder capitalism can turn out to create less value for the stakeholders whose interests it is supposed to reflect and serve, and that stakeholders will ultimately be worse off if this is the direction the development of the economy takes. And it may be that shareholder capitalism, with its more clearly defined purpose and governance principles, is ultimately better equipped to keep business leaders on their toes and create value not only for shareholders but for stakeholders at large. So the argument goes in conservative circles.

Ideology and the ongoing ‘battle of ideas’ over business and society

While many of these arguments seem to fly in the face of public opinion of the more progressive kind, we must acknowledge how, in a polarized opinion climate, public opinion is divided on many political topics. Andrew Hoffman (2012) speaks of how the climate change debate in the US has become enmeshed in the so-called ‘culture wars’. Acceptance of the scientific consensus regarding climate change is now seen as an alignment with liberal views consistent with other cultural issues that divide the country (i.e., abortion, gun control, health care, and evolution). This tendency has only worsened under the Trump presidency.

On top of this we can observe how sustainable development and green transition are evolving as government-driven agendas, involving a high level of social and economic planning – not to mention the COVID-19 crisis and how the pandemic, for better or worse, has provided a large-scale affirmation of the primacy of government intervention in dealing with grand societal issues.

Under these conditions it has once again become relevant to speak not only of broader socialist tendencies in politics and society, but also of how CSR/corporate sustainability can be a Trojan horse or slippery slope leading from market capitalism into a new socialist order. In other words, the ideological underpinnings of the CSR debate are once again becoming more apparent.

This calls for more in-depth studies of the ideological commitments sustaining the theory and practice of CSR. It does not necessarily call for rejuvenation and regurgitation of Friedman’s short essay, though. Friedman is not as relevant as he used to be in discussions of CSR. The anniversary has done nothing to change this.

We need to look beyond Friedman and see him (only) as one part of the larger ideological tapestry. We need contextualized, updated engagements, not more flogging of a somewhat dead horse.

References

Hoffman, A.J. (2012). Climate science as Culture War. Ross School of Business Working Paper No. 1361, June 2012 / Stanford Social Innovation Review, 10 (4).

About the Author

Steen Vallentin is Director of the CBS Sustainability Centre and Associate Professor in the Department of Management, Society and Communication at Copenhagen Business School. His research is centred on CSR (corporate social responsibility) and sustainable development in a broad sense.

Private Standard-setting Organizations and the Theory of Change

Theory of Change – Evaluating Supply Chain Outcomes

By Kamilla Hvid Andersen, Eileen Ryll, Dr. Caleb Gallemore and Dr. Kristjan Jespersen

Due to globalization, supply chains are becoming increasingly complex, challenging national governments’ regulatory capacity, or, perhaps, political will. Amid these “governance gaps” some private-sector organizations have begun setting voluntary standards promoting sustainable production practices. As they are not backed with legal force, private standards must demonstrate both positive impacts, credibility and inclusive decision-making to be perceived as legitimate in the eyes of external observers and member firms. Due to the complex and interrelated nature of sustainability issues, it can, however, be difficult to relate outcomes back to activities of the standard setting system.

To monitor their programs and evaluate their impact, many standard-setting organizations have adopted a Theory of Change (ToC).

Based on Carol Weiss’s theory-based evaluation approach, a ToC is a cause-and-effect illustration that makes explicit often implicit beliefs and assumptions about how different actions should generate impacts.

Evaluating impacts then requires collecting data that show how the proposed causal sequence plays out and, if discontinued, where it broke down. On this account, the ToC is necessary because practitioners often rely on tacit knowledge or even guesswork, rarely articulating the conceptual foundations of their actions explicitly.

ISEAL – The Standard for Standards

The ISEAL Alliance has been a key ToC promoter for many major sustainability standards. The organization is in essence a benchmarker for certification systems, working to disseminate better practices across sustainability standards. While the organization has a relatively small membership, its members include prominent standards like the Roundtable on Sustainable Palm Oil (RSPO) and the Forest Stewardship Council (FSC). Its Impact Code strongly encourages, though does not require, a ToC as the foundation for robust Monitoring & Evaluation (M&E).

While couched in an M&E framework, ISEALs’ framing of a ToC as a way to articulate building blocks for long-term goals also links it to strategic planning.  For the organization, a ToC is both product and process. As a product it maps out what to measure to assess a standard’s impact. As a process, it can help define a shared vision of how the standard should be making change, helping get member and observer buy-in on its strategic trajectory.

Case in Point – RSPO

The RSPO is a good example of how ToC procedures can influence organizational operations. Following ISEAL recommendations, the RSPO constructed an elaborate ToC in 2017. While its stated primary goal of making sustainable palm oil the global norm has remained since the standard’s early days, the ToC outlines the strategies deemed necessary to achieve this vision. By explicating the assumptions behind its actions, the RSPO’s ToC is simultaneously an M&E tool and a strategy. Though, like ISEAL, the RSPO introduced the ToC as an impact evaluation tool, the process generated critical discussions on the organization’s shared vision and explicated previously implicit beliefs regarding what making sustainable palm oil the norm actually means and how it could be achieved.

Because ToCs have both M&E and strategic planning components, responsibility for their development and implementation should not reside solely in M&E departments. Rather, effective ToC processes should include the whole organization and external stakeholders, requiring strategic decision-making support. Continuous feedback from all actors implementing elements of the ToC into their daily work can be valuable to highlight shortcomings of the ToC in place and guide future strategy reviews.

The Mechanics of TOC

A ToC process includes two broad phases. In the first, relevant actors develop or refine a shared vision and outline causal sequences necessary to achieve it. In the second, actors must incorporate the ToC into day-to-day routines.

The ToC as it emerges from the first phase is an intermediate outcome, part of a continuous learning loop that can be influenced by other processes surrounding the organization. It also may trigger other processes, as was the case within the RSPO when the ToC heavily informed another strategy document outlining member responsibilities across the value chain. The division between these phases, of course, is blurry, and it is always possible to re-evaluate and re-model the intermediate ToC, making the process iterative. All this work goes far beyond simple M&E, a lesson the RSPO learned the hard way, at first significantly underestimating the effort necessary to develop its ToC, regarding is simply as mapping out what was already there.

The Role of Interactive Adaptivity in Supply Chains Evaluation

Based on the example of their use by ISEAL and the RSPO, ToCs can serve several purposes:

  • First, they can support strategic planning while structuring strategic reconsiderations over time. Their iterativity might make it particularly important for organizations to revisit their ToCs before strategic re-alignments or in times of upheaval.
  • Second, in a complex field that spans multiple stakeholder groups, which as is case with the RSPO, most likely have divergent underlying assumptions, the ToC process can help illuminate blind spots. To be effective, the ToC needs to be inclusive of as many of the actors affected by the organization’s activities as possible.
  • Third and more prosaically, a ToC, while more than impact evaluation, can support evaluative work, serving as the backbone for M&E activities.

About the Authors

Caleb Gallemore is an Assistant Professor in the International Affairs Program at Lafayette College. He holds a Ph.D. in Geography and within his teaching, he focuses on southeast Asia, global land use, sustainability, research methods and geographic information science.

Eileen Ryll graduated from CBS with a degree in MSc. Business, Language and Culture with a focus on Diversity and Change Management. She has previously studied Business and Cultural Studies in Germany and Sweden. Her main interests are organizational strategy and intercultural encounters. 

Kamilla Hvid Andersen studied her bachelor’s and master’s degree at Copenhagen Business School. In June 2020, she graduated from the MSc. in Business, Language and Culture with a specialization in Diversity and Change Management. Her personal interests include sustainability, intercultural communication, and organizational change. 

Kristjan Jespersen is an Assistant Professor at the Copenhagen Business School. He studies the growing development and management of Ecosystem Services in developing countries. Within the field, Kristjan focuses his attention on the institutional legitimacy of such initiatives and the overall compensation tools used to ensure compliance.

Photo by Jungwoo Hong on Unsplash

Normative foundations for stakeholder involvement in environmental and societal impact assessments

A complex issue of global relevance

By Karin Buhmann

This article is based on previously written piece for the Centre for Business and Development Studies. It focuses on the normative foundations, such as guidelines and legislation as well as some common features or practices for good stakeholder involvement in environmental and societal impact assessments. As a part of the blog-post series on Consultations, Public Participation and Meaningful Stakeholder Engagement, it considers various aspects of stakeholder involvement as an element in the planning and decision-making relating to renewable energy, mining, infrastructure etc.

These blog-posts disseminate preliminary results from project examining best practice in stakeholder engagement as part of impact assessment. The project partly builds on investigations and interviews in Greenland in August 2018 and Sápmi in June 2018. [Ref: NOS-HS project, ref. 2017-00061/NOS-HS, on Best practice for Impact Assessment of infrastructure projects in the Nordic Arctic: Popular participation and local needs, concerns and benefits, Principal Investigator: Karin Buhmann)].

Public requirements on consultations and corporate management of risk to society

Consultation of the public in the context of assessments of societal or environmental impacts is not only common but mandated by law in several countries. In many places mandatory environmental impact assessment goes back to the 1970s. Mandatory impact assessments of other issues, such as societal sustainability or human rights, is a more recent phenomenon that to an extent builds on experiences gained around environmental impact assessment.

Even when impact assessment is not mandatory, it may be wise for a company to reach out to the local community and other potentially or actually affected stakeholders in order to map societal risks. This may contribute to counteracting a loss of the corporate ‘social licence to operate’.

Recommendations on ’meaningful stakeholder engagement’ in societal impact assessments

It is a general expectation that companies conduct so-called ‘meaningful stakeholder engagement’ in order to identify potential or actual adverse impacts on, for example, the environment, labour conditions and human rights. This is a result of the OECD Guidelines for Multinational Enterprises – a detailed set of recommendations from OECD member states as well as several countries in Africa and Latin-America.

The recommendations target companies operating in or out of the relevant countries. Likewise, all companies (regardless of form and countries of registration or operation) engage meaningfully with affected stakeholders whose human rights are or may be harmed by a business activity, in order to understand and map the impact from the perspective of these affected.

The United Nations (UN) Guiding Principles for Business and Human Rights, which were a source for the 2011 update of the OECD Guidelines, refer to meaningful stakeholder engagement in this context. The objective is that the impact assessment will be conducted in a manner that takes account of the affected stakeholders’ perception of risks or actual harm caused, that is, adopting a bottom-up perspective.

The company is expected to prevent risks and actual harm that it causes or contributes to. It can only do so if it understands the problems from the perspective of those who experience or fear the problems.

OECD has developed a detailed Guidance on Meaningful Stakeholder Engagement for the Extractive Industries. The guidance includes an annex particularly on engagement of indigenous people. A translation into the Sami language was introduced at a seminar taking place back-to-back with the assembly of the Sami Parliament in Northern Norway in June 2019.

Even so, at a meeting on mining and sustainability, which took place in Northern Sweden later in June 2019, we observed very limited awareness of the guidance and relevant global guidelines among local NGOs and other civil society organisations. In fact, awareness is higher with some companies. Lack of knowledge of the normative standards that apply to companies make it difficult for civil society to require that companies observe the norms.

The OECD Guidelines and the UN Guiding Principles are not binding but mark a tendency towards recognition of individual access to influence through making one’s views and concerns known, even if this may not take place through a formalized process.

Overall, the past 40 years have witnessed a development in international environmental and human rights law towards direct access for the individual to partake in decision-making on business activities affecting one’s life [Pring and Noé, 2002]. Rights of indigenous and tribal peoples to be involved in decision-making on mining and other forms of natural resource extraction are often highlighted in this context [Triggs, 2002]. Consultations can form one element among others in ensuring such participation.

Mandatory requirements

The Nordic countries, which include Arctic areas, have long mandated planning of specific types of activities to include assessments of the environment so that the information can form part of the authorities informed decision-making. In some Nordic countries environmental impact assessments include broader societal aspects, such as impacts on health, employment, traditions and business operations [Nenasheva et al. 2015].

Specific requirements of separate assessments of societal impacts are less common in a Nordic context. However, Greenland’s self-government has introduced explicit requirements in the Act on Raw Materials mandating social sustainability assessments of activities that are may have significant societal impacts. Greenland has also introduced rules enabling authorities to make permits conditional on the company contribution to society, for example through vocational capacity building, employment of local labor, or locally based processing of explored raw materials.

Our project has shown that there are diverse opinions of such ’Impact Benefit Agreements’ (IBAs) that are tailored to each specific project and local context. While IBAs offers opportunities to agree on specific local measures, limited transparency on the contents reduce opportunities to develop solutions across projects.

Authorities can introduce specific requirements on the consultation process through general or special legislation. While such demands vary between countries, involvement of local communities and other affected stakeholders is a general element [Vanclay and Esteves, 2012].

Common demands on a good consultation process

As regulations and levels of detail vary between countries and types of impact assessments, specific demands on the process will not be described here. However, general indications are given by the so-called Aarhus Convention [UN 1998], which fleshes out the implications of the political decisions from the 1992 Rio Summit concerning public participation in decision-making concerning projects with environmental impacts.

The convention also covers human health and safety, locations of cultural significance etc., provided the impacts have a connection to the environment.

The Aarhus Convention establishes that:

  • the public must be informed about an activity in the early stages of a decision-making process;
  • the information must, among other things, include the character of the activity; what permit is applied for; the responsible authorities, timeline, place and procedure for public consultations on the activity; and available information on the activity’s impacts on environment, health etc.;
  • the information must be free and provided as soon as it is available;
  • reasonable time should be set aside between different phases of the process, and therefore both to inform citizens and for citizens to prepare and actively participate in the decision-making process;
  • the applicant for a permit is encouraged to actively engage in dialogue and to contribute information on the project;
  • authorities are responsible for making relevant information accessible, for example on the location for the activity, impacts on the environment in a the above sense (inclusive of health and safety), what measures will be taken to prevent adverse impacts, and alternatives to the proposed plan;
  • a summary of the information must be provided in a non-technical form that can be understood without technical prerequisites;
  • the consultation process must provide citizens with opportunities to express comments, information, knowledge and views that they find relevant. Citizens or NGOs who perceived their rights to be infringed upon are to have access to remedy provided by a court of law or another independent institution.

The Aarhus Convention has been signed by most European countries, including the Nordic states, and a few Central-Asian states.

Obviously, participation in a consultation process should not require participants to be familiar with the law, nor should the quality in principle depend on participant’s awareness of the informing normative foundations. It is possible, especially in countries with well-functioning public institutions, to ask the relevant authority to explain the rules and requirements and their implications. Elsewhere, civil society organisations are often able to provide advice and guidance.

Consultations aim to create dialogue, not conflict

Even if participation in a consultation is not a claim to having one’s view win out, a consultation is ideally a dialogue between citizens and the authorities or companies that conduct the consultation.

Consultations build on an aim of exchanging knowledge, views, concerns and needs and thereby to provide the best possible informed foundation for decisions and for projects to be adapted and regulated in response to the concerns and needs that have been voiced or identified through the consultation.

Both process and outcome depend on the involved understanding and respecting that the process builds on a conversation which is not about identifying a winner and a loser, but rather a dialogue towards an adapted result which may be a compromise between the original project idea and the thoughts, concerns and views expressed during the consultation process.

References

Esteves AM, Franks D, Vanclay F (2012) Social Impact Assessment: the state of the art, Impact Assessment And Project Appraisal 30(1) 43-42.

Nenasheva M, Bickford SH, Lesser P, Koivurola T & Kankaanpää P (2015). Legal tools of public participation in the Environmental Impact Assessment process and their application in the countries of the Barents Euro-Arctic Region, Barents Studies: Peoples, Economies and Politics 1(3) 13-35.

Pring, George (Rock) and Susan Y. Noé (2002). The Emerging International Law of Public Participation Affecting Global Mining, Energy, and Resources Development, in Zillman, Donald M., Alastair Lucas and George (Rock) Pring (eds) Human Rights in Natural Resource Development: Public participation in the Sustainable Development of Mining and Energy Resources, Oxford Scholarship Online, DOI: 10.1093/acprof:oso/9780199253784.003.0002.

Triggs, Gillian (2002). The Rights of Indigenous Peoples to Participate in Resource Development: An International Legal Perspective, in Zillman, Donald M., Alastair Lucas and George (Rock) Pring (eds) Human Rights in Natural Resource Development: Public participation in the Sustainable Development of Mining and Energy Resources, Oxford Scholarship Online, DOI: 10.1093/acprof:oso/9780199253784.003.0004.

UN (1998). Convention on Access to Information, Public Participation in Decision-Making and Access to Justice in Environmental Matters (Aarhus Convention).

About the Author

Karin Buhmann is Professor at Copenhagen Business School, where she is charged with the emergent field of Business and Human Rights. Her research interests include what makes stakeholder engagement meaningful from the perspective of so-called affected stakeholders, such as communities, and the implications for companies and public organisations carrying out impact assessments.

Photo by Clay Banks on Unsplash

Aspirational talk for a challenging walk

Professor Mette Morsing takes over the UN PRME  

By Jeremy Moon

The CBS Sustainability Centre and the Department of Management, Society & Communication (MSC) recently held a Panel Discussion to farewell Mette Morsing as she becomes the new Head of PRME (Principles for Responsible Management) based at the UN Global Compact office in New York.

This is clearly a challenge. Mette will be a rare academic in a world of international officials. She will lead a small team that supports the PRME initiative. PRME is intended to transform business and management education through research and leadership. It consists of 800+ business and management schools that have signed up to implement six principles concerning responsible and sustainable business education.  

Of course, the 800+ schools reflect very different educational and business cultures, and may have very different understandings of responsible and sustainable business. Doubtless the schools have other concerns so they may prioritize these differently… not least in these troubled times.

So in order to help – as well as challenge – Mette, we designed the Panel around the question: “What Should Business Schools Know and Do about Sustainability?”  The Panel duly raised challenges for Mette, reflecting their various vantage points around business and management education. The Panel members were:

  • Lise Kingo, Independent Board Member and former CEO & Executive Director, United Nations Global Compact (by video)
  • Florence Villeséche, Co-Director of the Diversity and Difference Platform and Associate Professor at Dept. of Management, Politics and Philosophy
  • Gregor Halff, CBS Dean of Education
  • Caroline Aggestam Pontoppidan, Academic Director of CBS PRME & Associate Professor at Dept. of Accounting
  • Claus Meyer, food entrepreneur and Adjunct Professor at the Department of Management, Society & Communication.

Mette Morsing responded to the perspectives raised by the Panelists and other participants were drawn into the conversation. This covered a range of issues and approaches to the sustainability challenges:

From the role of the ethic of care for people in business, to the role of data in sustainability; from how to integrate and govern environmental, social and governance responsibilities to forms of business school engagement for sustainability; and of course, strategies for green transformations.

I was particularly struck by the way that Claus Meyer contextualized his own work in the state of the food business which he described as being characterized by greed, obesity and other recipes for ill-health, over-supply, and starvation among other things. So, Claus takes a big picture and identifies and develops his responsibilities in his bakeries, restaurants and philanthropic work in this light.

How should Deans of Business Schools regard ‘their business’?

On the one hand, they could refer to the market for business management education, demand and supply; vital assets; competitors and collaborators; the impact of and influence upon regulators. But what I get from Claus is the big picture thinking.

So should the Deans bring into their strategic thinking the circumstances from which their students come – and don’t come, and the state of the businesses that their graduates enter (the distributions, resource uses, the dominant values)?

Isn’t this what they need to know for understanding and developing their impact on sustainability?  Is this the logic of a stakeholder approach to sustainability?

OK, Jeremy this is just talk… but as Mette reminded us in one of her most significant papers, aspirational CSR talk may be an important resource for social change … and thus part of the walk [1]. So, my parting advice to Mette is to try and get Business School Deans to better understand and connect with their wider context in order to act for sustainability.

References

[1] L.T. Christensen, M. Morsing & O. Thyssen (2013). CSR as aspirational talk. Organization, 20(3), 372-393.

About the author

Jeremy Moon is Professor at Copenhagen Business School, Chair of Sustainability Governance Group and Director of CBS Sustainability. Jeremy has written widely about the rise, context, dynamics and impact of CSR.  He is particularly interested in corporations’ political roles and in the regulation of CSR and corporate sustainability.

Supplier perspectives on social responsibility in global value chains

By Peter Lund-Thomsen

Worldwide there is now a search for new ideas, business models, and innovations that can help us in rebounding from the global impact of COVID-19 and bring our planet and world onto a more sustainable future trajectory. One of the areas where this is evident is sustainability in global value chains where we have seen a global disruption of world trade in ways that have affected not only global brands but also suppliers and workers around the world. Some observers argue that this will result in a global backlash against attempts at making global value chains, for instance, the global garments and textile value chains, more sustainable. I.e. that COVID-19 will make brands and suppliers sacrifice long-term sustainability considerations at the expense of short-term business survival.

In my understanding,however, what these recent events demonstrate is not so much the need for new innovations and “thinking out of the box” but rather considering how the current organization of global value chains and thinking around sustainability have overlooked the importance of “supplier perspectives” on what social responsibility actually means in these chains. Amongst many practitioners, especially in the Nordic countries, there has been a tendency to assume that global brands’ adopting corporate codes of conduct and sustainability standards, asking value chain partners (i.e. suppliers) to implement these, and then auditing for compliance as well as helping suppliers to build capacity to enforce these guidelines would be sufficient.

The case of Bangladesh illustrates why this approach is insufficient. First, many brands have cancelled their orders with Bangladeshi garment suppliers, leaving local factories at the verge of bankruptcy, and hundreds of thousands, if not millions of workers at risk, potentially without any income to support themselves and their families. Second, even with orders that have been completed, some brands have refused to honor their contracts and either not paid for the goods received, substantially delayed payments, or asked for discounts on present or future orders from suppliers.

Globally, there has been condemnation of these “unfair” trading practices by both suppliers themselves (particularly in Bangladesh but also highlighted via social media) and also international labor advocacy organizations.

And third, the level of outrage is so strong that the Bangladesh Garment Manufacturers and Exporters Association has allegedly been considering placing a ban on particular brands so that they may not source garments from Bangladesh in the future as they have largely failed to live up to their “buyer” responsibilities towards suppliers and workers in Bangladesh.

To me, a key lesson learned from these events is that global brands, business associations, labor advocacy organizations, NGOs, researchers and students can no longer simply “overlook” supplier perspectives on social responsibility in global value chains.

The only realistic way forward is to take account of the concerns of these suppliers if global value chains are to be more resilient in the long run.

Many of these supplier concerns are already well-documented but tend to be either ignored or discarded by “global North stakeholders” in their policies, practices or discourses more broadly – for instance, in how they conceive and talk of sustainability in sustainability conferences around the world.

Just to recap some of the main points that we have learned from studies of supplier perspectives on social responsibility:

a) The factory manager dilemma – e.g., factory managers and owners – for instance, in the global garment industry – have had been asked for continuous price declines by many of their buyers while the same brands have asked for increased levels of social compliance at the same time.

b) The same dilemma arises when factory managers are asked to provide living wages around the year by their buyers when demand is seasonal and price competition is fierce in the global garment industry. For most suppliers having workers sitting around idle for part of the year is not a viable business option.

c) In addition, there is a general unwillingness amongst most (but not all brands) to co-finance – for instance, 50% – of the necessary social upgrading of factories in countries such as Bangladesh. Hence, brands tend to push “social responsibility” onto their suppliers rather than co-investing in and jointly bearing the costs of these improvements themselves.

d) Profits earned from selling goods sold to end consumers in the global North remain highly unequally shared amongst the (ironically called) value chain partners – often with suppliers winding up with 10-20 percent of the value of final retail price.

e) In addition to this, global North (read: Scandinavian) stakeholders including brands, government representatives, NGOs, students, and others often perceive “sustainability” in value chains as mainly relating to environmental and (to a lesser degree) social responsibility in the value chain. Hence, the general talk often seems to be about how suppliers should make environmental and social investments without considering the need for addressing existing inequalities – i.e. unequal distribution of value in these chains – and the business aspects of running supplier operations. In fact, for many suppliers in countries such as India, Pakistan and Bangladesh, sustainability is first and foremost related to “economic” or “financial” sustainability. Only when suppliers are profit-making can they afford to invest in social and environmental improvements. This is not exactly rocket-science but a point that often seems to be completely overlooked by Scandinavian “sustainability” advocates.

f) Finally, what is sometimes considered “social responsibility in global value chains” in the global North might be narrowly defined as the payment of minimum wages, overtime payment, social insurance, and the implementation of occupational health and safety measures in supplier factories. Of course, I am all for supplier factories implementing these measures. However, I also sympathize with many suppliers, NGOs and other stakeholders in the global South that point to other aspects of social responsibility that may be more contextualized.

For instance, in South Asia, many studies have pointed to factory managers helping to finance the education/school fees of the children of some of their workers. Financing the weddings of young workers or the weddings of the sons/daughters of their workers is another sign of social responsibility amongst many factory owners in South Asia.

From a Scandinavian perspective, this may not be related to “social responsibility”.

However, in the sub-continent, where your wedding day is often considered the most important day in your life, and very important for your family’s wider social standing in society, employers’ financial support may be seen a very valid act of practicing “social responsibility”.

Providing tea to your workers may also be considered an act of “social responsibility”. Again – from a Scandinavian perspective – this may not be considered a big act of social responsibility. However, then again, is it really that difficult to understand? How many of us in Scandinavia do not value it when our own employers provide us with free tea or coffee? It gives us the opportunity to socialize with our colleagues or take a much needed break between different work tasks. Why should it be any different in countries such as India and Pakistan where tea drinking could almost be considered a national sport?

Moreover, some factory managers in South Asia allow especially young mothers or women with even slightly older children the option of either working part-time (when the kids are in school or someone else is at home to take care of them) or engaging in home-working so that they may look after their kids while engaging in for instance (embroidery) whenever there is a free moment. Of course, I do recognize that home-working is also often associated with receiving very low wages and not having any social insurance.

However, during COVID 19, even in the Scandinavian context, homeworking has become an absolutely essential part of keeping private companies and public institutions afloat crisis under such compelling circumstances. It has also involved many challenges for families with young children who had to engage in home-based work (typically computer-based) and taking care of their children simultaneously.

Yet if homeworking is indeed not only allowed but also encouraged by most employers in Scandinavia, why it is that brands in the global North sometimes impose an outright ban on their suppliers outsourcing particular work tasks to “home-based locations”?

No wonder that many factory owners and managers in the global South believe that global brands practice double standards when it comes to their social responsibility requirements (i.e. ‘do as I say but not as I do’).

In conclusion, there seems to a great need in Scandinavia for raising our own levels of awareness about the commercial challenges faced by suppliers and acknowledge the myriad ways in which “social responsibility” may be thought of and practiced – of course, without throwing out the baby with the bathwater. Compliance with core labor standards remains a key concern, but it is not the only way of conceiving of supplier responsibility in global value chains.

About the author

Peter Lund-Thomsen is Professor at the Department of Management, Society and Communication at Copenhagen Business School. His research focuses on sustainable value chains, industrial clusters, and corporate social responsibility with a regional focus on South Asia.

More about Covid-19 pandemic on Business of Society blog:

Building A Better Planet: Toward a Sustainable Post-COVID-19 Society

Small, yet important – and still responsible. Reflections on SMEs and social responsibility in times of Covid-19

How the pandemic can reset cities and transform aspects of urban mobility

The Coronavirus Pandemic – and the Consequentiality of Metaphors

Sustainable Development, Interrupted?

The Political Economy of the Olympics – Misconceptions about Sustainability

Supply Chain Responsibilities in a Global Pandemic

A Green and Fair COVID-19 Recovery Plan

In Movement from Tanzania to Northern Italy to Denmark

How to make food systems more resilient: Try Behavioural Food Policies

Lobbying and the virus – three trends to take note of

Image by International Labour Organization ILO

Small, yet important – and still responsible. Reflections on SMEs and social responsibility in times of Covid-19

By Søren Jeppesen

One thing seems to be clear by now – that we are all challenged by the effects of the Covid-19 pandemic. This includes all enterprises, large as well as small firms. As states and individuals, also SMEs (Small and Medium-size Enterprises) need to figure out how to respond. SMEs constitute the vast majority of enterprises on the Globe, and their response to the current situation, including how they behave in terms of social responsibilities matter a lot. If jobs disappear, or wages are lowered and/or working conditions deteriorate, a large number of persons (employees) and families will be negatively affected. If environmental standards are lowered the nature and humans will be negatively affected.

The perception of what constitutes social responsibilities varies substantially across countries. As SMEs in different parts of the world face very different situations (see Spence et al. 2018), also in times of Covid-19, the responses will be very different. We already witness intense debates on what is the ‘appropriate way’ of reacting. Most SMEs have a less formalized way of operating compared to larger firms. While this is viewed as leading to being less socially responsible compared to large firms this type of organizing – not being so standardized – maybe be is an advantage in an unknown situation like the one that we are witnessing right now. Agility, creativity and ability to make a decision fast could be an advantage right now like the Danish small firms that have adjusted their production to include critical health products show.

However, the examples are probably the exceptions rather than the rule as only a smaller section of the SMEs typically can be characterized like this. The majority of the SMEs are operating in more traditional, standardized ways and have a more limited range of responses as things stand right now.

In our part of the world, governments have implemented numerous support schemes trying to assist the private sector, including SMEs, in various ways. The Danish SME has various public-funded support packages and a highly formalized labour market cushioned by a number of social benefit programs to factor into the considerations. Hence, we can insist that an important part of managing continues to be keeping an eye on working conditions and the environmental impact. In other parts of the world like the developing countries, governments have so far done less and given the much more informal nature of the economies, SMEs are much harder effected.

The Ugandan SME is faced with no economic assistance and a complete lockdown of the society leading to a dramatically reduced – if not totally halted – operation and turnover. In addition, no social benefits exist to assist employees who are losing their job. So, the overarching topic concerns the socio-economic dimensions of how many SMEs that survive while retaining a good number of the staff – or on the more pessimistic side – how many that go down leaving scores of people unemployed and without an income affecting individuals as well as tons of families.

What can we then expect in terms of social responsibilities in such a situation? Given that some developing country SMEs are characterized as having ‘family-like culture’, we would expect such enterprises to retain the employees (Tran and Jeppesen, 2016). Even though the SMEs retain the employees, owners and managers personally have to handle the insecurity that accompanies the situation as well as relating to the concerns among the employees.

The family-like type of organization could ensure that employees are kept and not fired. Still, we know that a number of SMEs pay little if any wages in times of limited production. Hence, having a job with no income does not make a difference right now.

Small enterprises in developing countries are also praised for their community engagement in taking up activities ensuring women (Langevang et al, 2015) or young people income. The localized response may assist in various ways of helping citizens in dire need. Religion and which church that you are a member of play a role. Some churches, as well as the wealthier members (and among these SME owners and managers), come forward to assist their congregation and the less well-off families in times of need. 

We need to wait for the answer to whether and to what extent Covid-19 will be marked by resilience and a protective and more caring (social) response by SMEs – or rather by the tough reality of downsizing and/or closing down with numerous dire consequences.

References

Langevang, T., Gough, K. V., Yankson, P. W., Owusu, G., & Osei, R. (2015). Bounded entrepreneurial vitality: The mixed embeddedness of female entrepreneurship. Economic Geography, 91(4), 449-473.

Spence, Laura J., Jedrzej George Frynas, Judy N. Muthuri, Jyoti Navaret, 2018. Research Handbook on Small Business Social Responsibility: Global Perspectives. Edward Elgar Publishing.

Tran, Angie Ngoc & Søren Jeppesen. 2016. SMEs in Their Own Right: The Views of Managers and Workers in Vietnamese Textiles, Garment, and Footwear Companies. Journal of Business Ethics, 137(3), 589-608

About the author

Søren Jeppesen is Associate Professor at the Department of Management, Society and Communication at Copenhagen Business School. His research concerns the development of firms in developing countries. He focuses on SMEs, CSR and driving forces (or lack of same) for strategies of SMEs in developing countries in engaging in CSR (or not engaging).

More about coronavirus pandemic on Business of Society blog:

How the pandemic can reset cities and transform aspects of urban mobility

The Coronavirus Pandemic – and the Consequentiality of Metaphors

Sustainable Development, Interrupted?

The Political Economy of the Olympics – Misconceptions about Sustainability

Supply Chain Responsibilities in a Global Pandemic

A Green and Fair COVID-19 Recovery Plan

In Movement from Tanzania to Northern Italy to Denmark

How to make food systems more resilient: Try Behavioural Food Policies

Lobbying and the virus – three trends to take note of

Image by US Army Africa

On the Ground: What CSR and sustainability standards fail to address

By Hannah Elliott

In the fall of 2019, there was a flurry of news stories in the British media about political events in western Kenya which, according to one article, threatened the future of the nation’s beloved cup of tea. In Kericho, the heart of Kenya’s tea-growing country, the local community are reclaiming vast tracts of land obtained under British colonialism for the large-scale cultivation of tea. Faced with a land shortage that hinders possibilities for sustainable development, local activists are challenging the extensive land acquisitions that took place under colonial rule, many of which constitute the premises of multinational agri-business today. CSR initiatives and the sustainability standards that are increasingly ubiquitous in Kenya’s tea industry fail to address or acknowledge a sustainability issue that is of major concern to local communities on the ground: land.

During the early 20th century, while trying to create an export economy in eastern Africa, the British government identified the highlands of Kericho in Kenya’s fertile Rift Valley as a place of high agricultural potential and gave out land to European settlers. The area was identified as an ideal place for growing tea, a commodity that was already thriving elsewhere in the British Empire. With the entry of two major companies engaged in tea production in India and Sri Lanka, further land allocations were made, providing the premises for the expansive tea plantations that dominate Kericho’s landscape today.  

Colonial laws enabled these land allocations: the British government could acquire land and relocate the ‘natives’ who were occupying and cultivating it. The Kipsigis community living in the Kericho area lost large amounts of land, only to be compensated with smaller areas of less agriculturally conducive land in designated ‘native reserves’. Others remained in their home areas but were rendered ‘squatters’ required to work for settlers in return for their continued occupation.

Many today struggle to make a living from diminishing farms in the former native reserve areas as family land is subdivided among children, while others remain landless or forced to purchase land at high prices. Land shortage poses a direct challenge to sustainable livelihoods in Kericho.

These grievances are what the Kericho County Governor seeks to address. Identifying as a victim of historical land injustices himself whose ancestral land lies within the vast tea plantation owned by the multinational giant Unilever, he advocates for reparations that acknowledge the forceful acquisition of his community’s land. This implicates multinational tea companies directly. For the Governor and Kipsigis community activists campaigning for justice, these companies are operating on stolen property that rightfully belongs to the community.

Tea plantations employ large numbers of locals in roles that range from tea plucking to top management and offer opportunities and bursaries for adult and child education. While much of the British media coverage of Kericho’s land politics, including an article in The Economist, has envisaged Zimbabwe-like evictions of British companies in Kenya, the Kericho Governor made clear when I met with him earlier this year that it is not in anybody’s interests for the tea companies to hand over the land and leave.

Rather, following recommendations made by Kenya’s National Land Commission, the Governor asks that tea companies apply to the county government for new land leases, following which the land can be resurveyed.  Undeclared acreage, he argues, should then be reverted back to the county government. In addition, the Governor seeks to increase land rent so that the county government is more adequately remunerated for the land.

This, along with demanding mesne profits from multinationals for the use of the land since 1902, is intended to enable more equitable redistribution of the wealth generated from large-scale tea production.

One Kipsigis community activist whom I met envisaged a new model of business: a continuation of plantations’ management and operations, but with the local community, the ‘rightful landowners’, as the major shareholders. This is not to say that all of these proposals are wholly feasible or realistic for tea companies, but to envisage other ways of doing business whereby local communities and authorities are rendered more equal partners.

This goes beyond CSR initiatives which, while valued in Kericho, can be seen as a continuation of colonial paternalism rather than rethinking the very premises of companies’ local engagement. It also goes beyond the certified sustainability standards provided by organisations such as the Rainforest Alliance and Fair Trade that seek to ensure economic, environmental and social sustainability in the tea supply chain yet are generic, driven more by the demands of distant buyers in Europe and North America than those of local communities on the ground.

Undoubtedly, community land claims in Kericho are entangled in local politics. The Kericho Governor’s campaigns are part of a populist political strategy that has seen him win two terms in office. Furthermore, judging by Kenya’s postcolonial history, there is no guarantee that relinquished land or funds would be equitably rolled out to the community should he succeed. Another caveat relates to major challenges facing the tea business in recent years with regard to profitability: at the time of my fieldwork earlier this year, the price of tea hit an all-time low.

The coronavirus pandemic will surely further threaten the industry. In this context, local political challenges of the kind we see in Kericho might push companies to reconsider their operations entirely.  

However, this shouldn’t preclude reimagining the terms of companies’ engagement, not only in Kenya but across Britain’s former settler economies. If large-scale agri-business is to face up to the challenges of sustainability in the places it operates, it must acknowledge the historical grievances attached to the ground beneath it and engage with local communities beyond the confines of CSR and sustainability standards.    

About the Author

Hannah Elliott is a Postdoctoral Research Fellow at CBS’ Department of Management, Society and Communication. Her research on the SUSTEIN project critically examines the production of certified sustainable Kenyan tea.

Image by ©2010CIAT/NeilPalmer

The problem with CSR: why companies need to listen to their activist employees

By Luda Svystunova and Verena Girschik

The current pandemic has exposed blatant social injustices and inequalities around the world, prompting businesses to face their societal impact. Before the crisis, however, a rising wave of employee activism had already started to call into question the extent to which companies had managed to meet their moral obligations. Employees at Wayfair, Microsoft, Google, Twitter and Amazon have protested against their employers’ stance on issues ranging from climate change to migration, pushing them to deliver on public commitments or refusing to contribute to morally dubious projects, such as Amazon’s facial recognition software that had potential to contribute to racial discrimination.

As the crisis has provided ample opportunities to reflect on and reconsider the role of business in society, we believe that this is the time to learn from employee activism – and to learn to embrace it as a force for change.

The problem with CSR

Virtually all companies today pursue a CSR agenda, strengthened by the global agreement around Sustainable Development Goals (SDGs), the growing power of corporate sustainability rankings, standardization of sustainability reporting and the proliferation of consultancies who offer support to companies pursuing a shared value approach to social responsibility. Aligning business and societal value creation, such approaches promise win-win solutions in addressing social ills. Yet it is the very promise of win-win solutions that undermines critical engagement with companies’ roles in creating or reproducing social ills.

First, CSR has become the corporate worlds’ dominant paradigm for change that is positive and comfortable. If CSR managers want to avoid eyerolls, especially from top managers and shareholders, they need to speak the language of profit and present a measurable business case for addressing social ills. By enabling companies to do well by doing and looking good, however, CSR may also cultivate complacency. This does not mean that CSR has failed to encourage companies to embrace more responsible business conduct. But it is a potent substitute for engaging with the many uncomfortable social problems as to which companies have hitherto failed to do the right thing.

Second, the triumph of CSR is symptomatic of and reproduces social inequalities. CSR is driven by privileged employees and managers often based in the corporate headquarters – members of the organizational elites. The voices of others in the company, as well as the people affected by corporate activities, are seldomly included. Indeed, Kaplan (2020) suggests that the business case alienates employees and does not deliver on promises to stakeholders. Misguided CSR initiatives can actually make things worse for those they aim to help. By limiting attention to win-win solutions, CSR has failed to pay attention to those who lose.

How can employee activism help?

Activist employees are those employees that care about and actively promote social justice in their company. With this, we call upon companies to stop viewing employee activists as antagonists or nuisance and instead invite activism in order to face problems head on. Specifically, we suggest that companies should consider the following:

1 ) Accept activist employees rather than “handle” their dissent.

Activist employees bring to the front the less comfortable social problems that a company creates, reproduces, or in other ways is complicit in. Commonly, companies manage dissent by firing those employees who speak out against corporate misdeeds. Activist employees’ voices may be uncomfortable, but if fired, they will certainly still be heard – if not by management, then certainly by the public.

2 ) Listen to dissenting voices and engage with uncomfortable truths.

Employee activists can help by shedding light onto just such areas where businesses may have missed the mark. Representing social movements inside the company, they generate awareness of problems it may have missed or not taken seriously and even contribute to solutions. Most importantly, the break with the complacency of corporate CSR practice and drive the more radical change that is so badly needed.

3 ) Confront privilege and listen to employee activists

Companies should be mindful of who gets to have a say in the issues that matter. It is easy to overlook issues voiced by activists on the ground – across the operations and especially in distant local offices. Yet they are often the ones with a first-hand understanding of social ills as well as externalities produced by the company.   

4 ) Tackle social injustices within.

Not all employee activism is driven by personal values and compassion for others: alongside staff walkouts for greener business at Google and Amazon, Google’s temporary workers and Amazon’s warehouse employees fight for fair labour conditions. In tackling social ills, companies should never overlook the struggles of their own employees.

CSR is still needed, but we can do even better. What we are proposing is inconvenient, disturbing, and uncomfortable, but it’s time for companies to get things right.

Our critique of CSR is inspired by the following contributions:

de Bakker, F. G., Matten, D., Spence, L. J., & Wickert, C. (2020). The elephant in the room: The nascent research agenda on corporations, social responsibility, and capitalism. Business & Society, in press.

Feix, A., & Philippe, D. (2020). Unpacking the narrative decontestation of CSR: Aspiration for change or defense of the status quo?. Business & Society, 59(1), 129-174.

Kaplan, S. (2020). Beyond the business case for social responsibility. Academy of Management Discoveries, 6(1), 1-4. 

Khan, F. R., Munir, K. A., & Willmott, H. (2007). A dark side of institutional entrepreneurship: Soccer balls, child labour and postcolonial impoverishment. Organization studies, 28(7), 1055-1077.

Schneider, A. (2019). Bound to Fail? Exploring the Systemic Pathologies of CSR and Their Implications for CSR Research. Business & Society, in press.

About the Authors

Luda Svystunova is a Lecturer in International Management at the Institute for International Management, Loughborough University London. Luda’s research examines multinational firms’ interactions with their non-market context through corporate social responsibility and corporate political activity, particularly in non-Western settings. She is also interested in the role individuals within and outside companies play in these interactions. Luda’s Twitter: @LudaSV. 

Verena Girschik is Assistant Professor of CSR, Communication, and Organization at the Department of Management, Society and Communication, Copenhagen Business School. Verena’s research focuses on the responsibilities of companies in the contexts of complex societal problems and humanitarian crises. Interested in relations between companies, governments, NGOs, and other societal actors, her research explores how companies negotiate their roles and responsibilities, how they perform them, and to what consequences. Verena’s Twitter: @verenaCPH

Image by GeekWire Photo / Monica Nickelsburg

Supply Chain Responsibilities in a Global Pandemic

By Jette Steen Knudsen, Erin Leitheiser, Shaidur Rahman & Jeremy Moon

What is the responsibility of Western retailers to the workers who make their garments as the coronavirus forces factories to shut down?

Shopping malls are closed, gatherings are banned, thousands of employees have been furloughed, and movement outside of one’s home is discouraged if not outright illegal.  This has meant bad news for apparel brands and retailers as nervous customers cease buying. In the U.S., for example, retail sales in March were down almost 9% compared to in February.  Those brands and retailers which have built their businesses on a fast fashion model – predicated on the continuous churn of high volumes of cheap clothes – face unprecedented challenges and questions about responsibilities in the face of the COVID-19 pandemic. 

Retailers have responded in different ways.  As they have had to shut down their stores many have stated that they will not pay rent. For example, German sportswear producer Adidas stated (March 26 200, Reuters) that

“Almost all over the world there is no normal business anymore. The shops are closed. Even a healthy company like Adidas cannot stand this for long”.

Adidas was one of a string of retailers in Germany that said they wouldn’t be paying their landlords while their stores are closed as part of efforts to stem the coronavirus spread. Adidas said it would need credit even after staff cut their working hours, executives waived part of their pay and the company stopped share buybacks. Adidas’ decision was met with an uproar in Germany eventually forcing the company to formally apologize and to report that it planned to suspend a planned 1 billion euro ($1.09 billion) share buyback in an effort conserve cash after closing its retail outlets in Europe and North America. Adidas also said it would pay rent.

In Denmark, Anders Holck Poulsen, the owner of the clothing company Bestseller and Denmark’s wealthiest man, also announced that the company would not pay rent for its stores. Bestseller (parent company for brands like Vera Moda, Jack & Jones, Pieces, and Name It, among others) later reversed the decision following a public outcry and the CEO went on national television to apologize. Bestseller subsequently laid off 750 employees and sought financial support from the government.  This decision was met sharp with sharp criticism because over the last five years Mr. Holck Poulsen has paid DKK 7.6 billion (more than $ 1 billion) in dividends to his private holding company Heartland.

Not all companies have responded this way. Patagonia, for example, has promised that all of its employees will continue to receive their regular pay during store closures.

However, with many large brands scaling back their social responsibility in the Western part of the world, what kind of responsibility can we reasonably expect from Western retailers in places such as Bangladesh?

Bangladesh is heavily dependent on apparel production. Apparel comprises more than 80% of the country’s total export revenue and the sector employs more than 4 million workers, most of them women.  However, in recent weeks many Western brands have cancelled their orders from Bangladesh, and it is estimated that more than 2 million workers have lost their jobs.  H&M is the largest buyer of garments from Bangladesh and has reluctantly agreed to take and pay for the shipments of goods already manufactured as well as those that are still being produced. Inditex, PVH and Marks and Spencer have also agreed to pay suppliers for orders that are already produced but not all companies have done so. Primark, for example, has cancelled orders, and virtually all buyers have pulled orders that have not yet gone into production.  At the end of March 2020 orders for more than $1,5 billion had been cancelled, and Bangladesh reported -19% year-on-year export volume for the month.

What is the responsibility of large brands like Bestseller or H&M for their supplier factories in Bangladesh? Western brands have a long tradition for stating their commitment to CSR in global supply chains, including elaborate Codes of Conduct for social and environmental performance in supplier factories. Bangladesh has staked its claim as the low-cost producer of garments, and its costs and production capacities cannot be easily matched elsewhere in the world. The model of fast fashion needs Bangladesh, and Bangladesh, in turn, needs fast fashion. 

Now that crisis reigns upon all of us in the form of a global health pandemic, it is the most vulnerable of workers who have been left in the lurch, be it the retails associates who stock shelves or the stitchers who sew together T-shirts.  As buyers cancel orders, few recognize the perilous position that these workers are left in. For those working on the factory floor in Bangladesh, more than 2 million have been furloughed, many without pay, despite a governmental scheme intended to address these issues.  The meagre wages of garment factory workers have not allowed for savings that could support them in such times, and the prospect of long-term closures – or at least, no orders to fill and therefore no paid work – means almost certain disaster for them and their families. 

Garment workers in Bangladesh have risen up in protest, stating that

“…we don’t have any choice.  We are starving.  If we stay at home, we may save ourselves from the virus.  But who will save us from starvation?”

(13 April 2020, The Guardian).

While some brands, like Primark, have set up charitable funding pools to help support workers, the money has yet to make it to their pockets, and the “charitable” framing of this funding on behalf of brands speaks volumes about what they see as their responsibilities.  Yet, when the crisis passes and shopping malls re-open, brands will again be reliant upon these workers to satisfy their demand for an endless supply of cheap garments. 

Given that cheap labor is a fundamental need for fast fashion companies to survive, shouldn’t brands likewise ensure the survival of those on which it depends? 

This is the first in a series of blogs which will further explore the responsibility of the Bangladesh government, factories, Western governments and civil society organizations for dealing with COVID-19 in places like Bangladesh.  

About the authors

Jette Steen Knudsen is Professor of Policy and International Business at the Fletcher School of Law and Diplomacy at Tufts University and holds the Shelby Collum Davis Chair in Sustainability.  She is also a Velux Fellow at Copenhagen Business School where she is part of the Regulation of International Supply Chains (RISC) project. 

Erin Leitheiser is an Assistant Professor at Copenhagen Business School and Project Manager of the Regulation of International Supply Chains (RISC) project. 

Shaidur Rahman is Professor of Sociology at BRAC University where he is part of the Regulation of International Supply Chains (RISC) project. 

Jeremy Moon is Professor of Sustainability Governance and Director of the Sustainability Centre at Copenhagen Business School.  He is the Project Coordinator of the Regulation of International Supply Chains (RISC) project.

Photo by ILO Asia-Pacific

Just announced: And the world’s worst company is …. Really?

Why naming a hardly known German company as the world’s most controversial company inadvertently makes a lot of sense

By Dieter Zinnbauer

Business bashing is a popular spectator sport in some quarters – sometimes justified, sometimes not. So there is certainly no shortage of strong contenders for the most controversial company contest. Who would be your pick for the 2019 shortlist? Perhaps one of the companies that led millions of people into opioid addiction? The biggest carbon dioxide emitter? Or someone from the big tech side that as many believe has ushered in a new, toxic era of surveillance capitalism?

Picking the unlucky winner is as difficult as it is subjective.  But as is always the case these days big data and AI are riding to the rescue. They are claimed to power an evidence-infused attempt by a boutique ESG consultancy to identify the most controversial company in the world. According to the inevitable marketing pitch, a secret-sauce algorithm churns through a proprietary database of millions of new and old media mentions for more than 140,00 companies to bring science to the art of naming and shaming and to reveal the 2019 most controversial company in the world.

And as just announced last week, the winner is:

Tuev Sued!

?

Tuev Sued?

If you are not a German car owner (the company is best known there for carrying out the obligatory and feared periodic car inspections) or an expert in technical certification issues you may have never come across this name before.

Tuev Sued is one of the big players in the global certification-of-everything business. Born as the Duev (“Dampfkesselueberwachsungsverein” – steam boiler inspection association) in 1800 to bring technical oversight to the issue of exploding steam boilers during the industrial revolution, the Tuev Sued (and its brother) Tuev Nord have grown into multinational enterprises that provide technical audits and certification services for an ever-growing number of products, processes and service across industries and across the world.

Arguably the main reason why Tue Sued was picked as the most controversial company (besides a weighing in favor of novel entries that guarantees sustainable newsworthiness to an annual ranking now in its 10th edition) is that it is implicated in the infamous 2019 Brumadinhu dam disaster in Brazil. A collapse of a dam erected by a mining company unleashed a toxic mudflow on the downstream communities that killed more than 250 people. Tuev Sued had carried out technical inspections of the dam and allegedly assessed it as safe. The case is still in court, no conclusive verdicts have been reached.

So is it fair to put the spotlight so fully on a comparatively small technical certification outfit, rather than say the big mining company that built and ran the dam?

Irrespective of what one thinks about the merits of this choice,  the case highlights what I would submit is one of the most fundamental and unresolved drivers of corporate irresponsibility: the persistent challenge to make all kinds of certification and assurance processes that are so essential to functioning markets and economies work as intended.

From the never-ending string of accounting and auditing scandals to the crucial role of rating agencies in the 2007+ financial crisis to emerging examples of greenwashing in the carbon market certification business, there as common thread: certification and assurance often fail to provide the independent, effective vetting that it is supposed to deliver.

Issues involved include:

  • the under-resourcing of the inspection process as neither principal nor agent have strong interests in overly strict and deep inspections,
  • pitching certification as loss leaders to open the door for upselling into other lucrative consulting services;
  • borderline rubberstamping of certifications to secure repeat business and avoid being viewed as difficult in the industry and thus putting off other potential clients.

Strengthening liability, setting more stringent standards for the standards watchdogs, tightening compliance measures and building public reputational pressure go some way to rework incentives towards more credible certifications.

But at the end of the day they are more ameliorative than tackling the root problem:

As long as certification services are selected by and directly paid for by the very clients that are meant to be certified, assured, rated or audited and as long as certification is strictly a for-profit business there are fundamental conflicts of interests at the root of these services that put their efficacy and independence at risk.

Ideas of how to rewire these markets and business models abound yet so far the problem of thin political markets seems to hold: both certifiers and certified have strong interests to preserve the status quo and formidable lobbying power to advocate for this, while the dull technical nature of the issues at stake and the dispersed group of beneficiaries from alternative solutions prevent a forceful, concerted push for better arrangements.

Yet there is hope that this fundamental conflict of interest issue will gain more prominence in the policy and public debates very soon. The emerging transformational push to de-carbonize businesses and economies relies in part heavily on carbon credits, carbon offsets and other green-impact instruments whose efficacy and the very reason for existence relies on proper certification and assurance.

 How to move beyond and away from issuer-directly-pays certification services will have to be an important part of the policy designs in the making.

Tuev Sued is a symptom of the problem – it is the systemic issue at the root of the case that justifies putting it into the spotlight – although it is unclear of the secret-sauce algorithm at work had this in mind when making the selection. 

Let’s hope that in twenty years’ time the idea of a rating agency, a dam examiner, a medical device inspector or a carbon credit certifier being selected by and paid directly by the people they are supposed to pass an independent judgment on appears as strange as the notion that a pharmaceutical company would be able to choose between different agencies to get its drugs approved and directly funds large parts of their budgets.

About the author

Dr. Dieter Zinnbauer is a Marie-Skłodowska-Curie Fellow at CBS’ Department of Management, Society and Communication. His CBS researches focus on business as political actor in the context of big data, populism and “corporate purpose fatigue”.

Twitter: @Dzinnbauer

Essays: https://medium.com/@Dzinnbauer

Working papers:  https://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=1588618

Photo by Icons8 Team on Unsplash

Helpful hypocrisy? The ‘ironic turn’ in corporate talk about sustainable development

By Sarah Glozer and Mette Morsing

Do you feel uneasy to think that companies use a humorous tone in their communications about grave challenges such as climate change, pollution and inequality? We suggest the notion of helpful hypocrisy to coin this new ironic turn in recent corporate communications.

Ironic campaigns

We have ourselves been intrigued by this new ‘ironic turn’ in corporate communications. Large international fashion brands such as Patagonia, Benetton and Diesel have recently challenged conventional informational approaches to marketing communication about sustainability, choosing instead to incorporate a humorous (or more precisely, an ironic) edge to their visual representations as they address issues of climate change.

Such campaigns are ironic because they bring a twist of message incongruity and ‘double talk’, where they show a world within which ambiguity, incongruity and contradictions are real and leaving it to consumers what to make of it. This stands in sharp contrast to conventional prescriptions in marketing communications where the idea of ‘one message’, or what we refer to as ‘single talk’, prevails with the purpose of targeting consumers effectively. In our recently published paper, we suggest the term ‘helpful hypocrisy’ as a way of coining the ironic turn.

On the one hand, these new ironic messages show consumers the dire consequences of pollution, climate change, flooding and deforestation (i.e. implications of consumption) and on the other hand, they simultaneously carry strong aesthetic appeals to enjoy life and consume more, comforting consumers that ‘life goes on’ and hedonistic lifestyles will continue. In new ‘twisting’ advertising campaigns, companies blend these two narratives in complex, ironic visualization.

Such double talk is often deemed hypocrisy and greenwashing in research as well as in practice. And while we agree with such assessment, our analysis shows that there is also something else going on.

Double talk

We point to how such double talk may also provoke critical reflection and surprise through displaying inconsistencies between ‘talk’ and ‘talk,’ and hereby engage its audiences as more than passive recipients. In a cosmopolitan context, where people like to think that they are able and capable of critically reflect on their own lives and make their own decisions, preaching and moralizing communications about ‘good behavior’ is becoming increasingly less effective.

Youth is particularly opposing being told what to do. And even in spite of the severe consequences of continued consumption, a certain ‘climate change fatigue’ has entered the market. Consumers know that they should buy less and more sustainable products, but they are resistant to messages that give them feelings of guilt and shame.

In such a world, we suggest, one way to gain traction is to engage audiences in ironic and humorous communications in which the receiver is him- and herself activated to interpret incongruous ambiguous messages.

Helpful hypocrisy

Analyzing Diesel’s Global Warming Ready campaign, we find how the technique of irony is particularly outspoken as beautiful people in beautiful clothes are inserted into out-of-place environments, juxtaposing them if you will, by the dire implications of climate change, in a way which makes the whole scenery appear absurd.

In our analysis, we develop an analytical model that positions irony and double talk vis a vis conventional marketing campaigns.

We point to how the blend of climate change and luxury consumption is an ambiguous affair, and we show how incongruity is present across four levels of Diesel’s use of irony: fantasy versus reality (framing), survival versus destruction (signifying), utopia versus dystopia (symbolizing) and political activism versus consumer society (ideologizing).

Without moralizing or telling consumers what to do, or even restraining from telling consumers how good the corporate sustainable activities are, Diesel exposes the ambiguities of society and sustainability by using humor.

Now, we are not fooling ourselves. Diesel is a company with an ambition of selling more products. And where satire is a technique that intends to improve humanity by critiquing its ‘follies and foibles’, companies are generally known to have less noble ambitions.

But we argue – with Swedish sociologist Nils Brunsson – that “hypocrisy appears to be exactly what we demand of modern organizations: if we expose organizations to conflicting demands and norms, and expect that they should respond to them, then we must also expect hypocrisy” (1993: 8-9).

We propose that irony may be considered a means of ‘helpful hypocrisy’ in which the public is exposed to the contradictions and vices of society with the purpose of changing people’s opinion and create betterment of society.

References

Brunsson, N. (1989). The Organization of Hypocrisy: Talk, Decisions and Actions in Organizations. Wiley.

Glozer, S. and Morsing, M. (2019). Helpful hypocrisy? Investigating ‘double-talk’ and irony in CSR marketing communications, Journal of Business Research

About the authors

Sarah Glozer is Associate Professor of Marketing and Society in the School of Management at the University of Bath, UK. She is also Deputy Director of the Centre for Business, Organisations and Society (CBOS). Her research focuses on corporate social responsibility (CSR) communication, digital marketing and ethical markets/consumption.

Mette Morsing is Professor and Mistra Chair of Sustainable Markets at Stockholm School of Economics (Sweden) and Professor of Corporate Social Responsibility at Copenhagen Business School (Denmark). Her research concerns how organizations govern and are governed in the context of sustainability. She is particularly interested in how communication, identity and image dynamics work in this regard.

The image is one of the eight images displayed in Glozer & Morsing (2019) from the Diesel Global Warming Ready campaign: New York City submerged in water

When business is not as usual – why companies should engage with humanitarian crises

By Verena Girschik and Jasper Hotho

As evidenced in places such as Syria and Yemen, humanitarian crises are becoming ever more complex (OCHA, 2017a). In response, international and humanitarian organizations increasingly call upon the private sector to help alleviate human suffering. As we describe in our recent article (Hotho & Girschik, 2019), many companies have answered this call. In the past, the role of companies in humanitarian crises tended to be limited to financial or in-kind donations. Today, more and more companies seek a direct role in the delivery of humanitarian action, often through collaborative partnerships with humanitarian organizations. 

Why invest in business-humanitarian collaboration?

Companies that engage in humanitarian initiatives often do so for philanthropic reasons. However, these companies may fail to appreciate that engagement in humanitarian initiatives can also provide them with longer-term strategic advantages (OCHA 2017b). 

To begin with, business-humanitarian collaboration likely has reputational and motivational benefits. Contributions to humanitarian relief efforts send positive signals to external stakeholders, including customers and governments, as well as internal employees. 

However, companies may also benefit in more tangible ways.

First, engaging directly in the delivery of humanitarian assistance can provide firms with the opportunity to learn about new countries and markets. For example, MasterCard’s payment solutions for humanitarian crisis situations allow the company to contribute to a good cause while developing a more detailed understanding of under-explored areas that may at a later stage become potential markets.

In addition, humanitarian engagement provides opportunities for relationship building with international organizations, governments, and local communities. Such connections can enhance a firms’ competitiveness as they may unlock or facilitate interesting market opportunities down the line.

Humanitarian crisis contexts also provide companies with opportunities to develop new skills and competencies or strengthen existing ones. For example, by participating in the Logistics Emergency Team—a business alliance providing UN agencies with vital logistical support—companies such as A.P. Møller-Mærsk have the opportunity to push their logistical capabilities while providing life-saving support during complex emergencies.

Business-humanitarian partnerships must address three fundamental challenges

Notwithstanding the potential of business-humanitarian partnerships, the extreme conditions of humanitarian crises renders such collaboration especially complicated and risky. Humanitarian assistance is often delivered to vulnerable populations in politically complex and volatile contexts. As a result, partners face three fundamental challenges that they need to be prepared to address if they are to leverage the potential of their collaboration.

1.     Securing ethical engagement

The first challenge is to ensure that private-sector involvement is ethically sound and aligned with the humanitarian principles of humanity, impartiality, neutrality, and independence. Companies and their humanitarian partners need to uphold these principles in spite of commercial interests and practical constraints.

2.     Realizing effective engagement

Collaborations between humanitarian organizations and companies are complex to navigate. Partners need to find ways to build mutual understanding and trust and create a favorable climate for mutual problem-solving. In addition, both sides may need to adjust processes and operations in order to align capabilities and enable effective collaboration.

3.     Sustaining business-humanitarian partnerships

Companies and their humanitarian partners often struggle to demonstrate measurable benefits from their collaborations. Companies need to sustain internal support for such partnerships even when there is no immediate business case. In addition, humanitarian organizations need to engage companies in the right place at the right time; namely, where humanitarian needs are greatest.

Addressing these three challenges is neither quick nor easy. It is through strong mutual commitments and innovative responses that business-humanitarian partnerships can leverage their potential and deliver humanitarian assistance ethically, effectively, and sustainably.

References:

Hotho, J., & Girschik, V. (2019). Corporate engagement in humanitarian action: Concepts, challenges, and areas for international business research. critical perspectives on international business, 15(2/3), 201-218.

OCHA (2017a). Annual Report 2017

OCHA (2017b). The Business Case: A Study of Private Sector Engagement in Humanitarian Action

About the authors

Verena Girschik is Assistant Professor of CSR, Communication, and Organization at the Department of Management, Society and Communication, Copenhagen Business School. Verena’s research focuses on the responsibilities of companies in the contexts of complex societal problems and humanitarian crises. Interested in relations between companies, governments, NGOs, and other societal actors, her research explores how companies negotiate their roles and responsibilities, how they perform them, and to what consequences. Verena’s Twitter: @verenaCPH)

Jasper Hotho is Associate Professor at the Department of International Economics, Government and Business at Copenhagen Business School, and Senior Editor for the top-tier academic journal Organization Studies. Jasper’s research focuses on the opportunities and challenges that arise from private-sector involvement in the delivery of humanitarian assistance.

Image by  Colourbox.dk

When is a banking scandal a corporate social responsibility scandal?

By Jeremy Moon

I arrived in Australia to discuss and research corporate social responsibility (CSR) with colleagues at RMIT University and the University of Melbourne to see the papers covered in … a banking scandal.

The Westpac Bank product ‘Litepay’, designed to enable customers to transfer small amounts of money overseas, is alleged to have enabled money-laundering on 23 million occasions. It is alleged that 12 customers used this service to transfer $500,000 to child exploitation criminals in the Philippines.

There is the usual background that senior management was aware of the failures but did nothing.  There is the usual foreground that the bank’s leadership made light of the problems, and was strangely slow to accept responsibility.  So far so depressingly familiar.

I also noticed Johannes Leak’s cartoon published in The Australian newspaper (27.XI.2019). OK, it is a caricature with the CSR consisting of activities that seem trivial and causes that, notwithstanding their social significance, are adjacent to the legality and ethics of Westpac’s main business!

But caricature is part of the cartoonist’s craft and it highlights the main message: the way that Westpac went about its business appeared untouched by the department ostensibly standing for its social responsibility. 

So what lies behind this contradiction? 

CSR professionals may well be educated, trained and experienced in other society-related issues.  But as the cartoon suggests they were unable to address some key social impacts of the bank’s business models.  This may be no accident.  It may well suit corporate leadership to have a CSR department to focus on ‘the worthy causes’ and to distract from the business of money-making.  So whilst the CSR staff engage in legitimation activities, the main CSR message (i.e. to serve societal good) is disconnected from conducting the core business. 

So we need to construe CSR as something more pervasive and robust such that it addresses the core business in all its complexity and technicality.  This may mean corporations re-thinking how their products are evaluated, who is around the table at strategy meetings, who leaders listen to, who they collaborate with, what sort of qualifications and capabilities are expected of senior managers and board members.

One positive

One positive in the Westpac story is that the triggers of social sanction operated.  Whistleblowers within Westpac (who advised the media), governmental leaders (who expressed grave disquiet and suspended Westpac from a public policy initiative), and major investors (who threatened exit), brought immense pressure on Westpac’s leadership for more proportionate responses. 

This is a belated success for the main message of CSR: that business needs to be responsible, and that failure here will be very costly. 

Sadly, it comes at a price that investors and customers may have to share. The bank needs to ensure that it has sufficient and appropriate CSR capacity to build the message into the practices of business as usual.

About the author

Jeremy Moon – Director of CBS Sustainability, professor of Sustainability Governance at Copenhagen Business School and BOS blog editor. Jeremy has written widely about the rise, context, dynamics and impact of CSR.  He is particularly interested in corporations’ political roles and in the regulation of CSR and corporate sustainability.

By the same author: Wonder Tech and the Institution of Gender

Cartoon’s author

Johannes Leak

Football and the Meaning(lessness) of Management Concepts

By Esben Rahbek Gjerdrum Pedersen

Romanticized management concepts often seem to fall short in capturing actual management practices in today’s corporate world. Experiences from other types of organisations may help deepen the understanding of the concepts and the phenomena they are trying to portray.

Romanticized concepts

The management literature is full of concepts, which indicate passion, engagement and community. Internally, terms like corporate culture, values, karma, spirituality, passion and even love and religion express a deep symbiosis between the individual and the organization. Externally, corporate communication is soaked in references to sustainability, citizenship, social responsibility, and community engagement.

If we are to believe the “About Us” sections, corporations today are more about benevolence than business.

There is a problem though.

What happens if you compare the rosy picture of business with harsh business realities? One illustrative example is the talk about management commitment. How does it go along with the fact that the average tenure of CEOs is steadily decreasing? And how do you combine talks about commitment with the recurrent discussions about bonus schemes? It seems like an awful waste of money to approve exorbitant compensation packages to CEOs if they were driven solely by an inner sense of duty and dedication to the job.

What all these management concepts have in common is that they try to give business personality, heart, spirit, and soul.

However, if we are interested in concepts like commitment, passion, and loyalty, today’s corporate world is perhaps not always the right place to look. Probably more than ever before, these concepts seem more meaningful in private life and collectives rooted in the local community.

Like community football…

As part of a survey among Danish football clubs (supported by a UEFA research grant), I asked club representatives a simple, open question: – What is the main reason to be engaged in the club? A few quotations are found at the bottom of the text and well illustrate some of the differences between the corporate world and community sport.  A few examples:

  • Stickiness. Commitment means being in it for the long haul. It is not unusual that volunteers are members of football clubs for 20, 30, and 40 years. When managers drift from one company to another, it serves as proof that they are committed to their career. Not the organisation.
  • Obligation. The quotations from the survey indicate that commitment to community sport is often linked to an obligation to support the local community and paying back for own experiences as active players.
  • Community. In community sport, commitment has roots. You are committed to something: – the sport, the people, the club, and the community. It is probably no coincidence that local club names usually refer to a city or a region, whereas the corporate names are mostly faceless abstractions referring neither to activity nor geography.

The real motives

The point is not that club volunteers are all saints dedicated to the greater good of society. Most volunteers probably start off with instrumental motives when they become engaged in club life; either because they play themselves and/or have children in the club. However, for some volunteers club life gradually becomes part of one’s identity and network.

The question remains, however, why the management literature seems so eager to wrap business in romantic rhetoric about commitment, loyalty, authenticity etc. when these concepts often seem to reflect what has been lost rather than what can be found in today’s corporate world. Of course, part of the management vocabulary can be passed off as organizational bullshit, but even the disregard of truth may reveal some truths about our society.

Maybe the abundance of romantic management concepts reflects a dream about relationships in a market characterized by transactions.

A seek for passion in a highly professionalized work life. Longing for a community when people have all become individuals. Whatever the reason, a researcher should restrict the use of concepts to organisations where they have not yet become emptied of meaning.

Like community football…

Table 1: Respondents about the main reasons for being active members of the football club (Translation from Danish)
– ”Make a difference in my local community and support my interest in grassroot football. Jeg am a club person and believe voluntary work should be a ”citizen duty” (…)”
– ”After a whole life as active in the club, also as trainer and board member, it was natural to continue (…) and give something back. I think it is fun to work with kids and people, who also give me a lot I can use in the work life”.  
–  ”I like the social life in the club and want to help others in getting the same experience”.
– ”I have played football from when I was a kid and had wonderful experiences that I like to hand over to the youth”
– ”Because I love football and like to give something back for all the years when I was more on the field than outside. Moreover, it is important that somebody do something in the associations in our community”. 
– ”Because my kids play in the club and because I think you should make an effort in the associations in the city. And not least because I like to be part of making a difference in the local associations.
– ”Have been an active football player all my youth, where I met engaged trainers and leaders. So it is probably to give something back”
– ”Help our city in having a place where children, young and elderly can play football under good conditions”
– ”Funny, I have asked myself the same question:-) I have been an active player from when I was 8-9 years old, to league player, to old boys – so it is simply paid back time for all the experiences (…) to all the people who made it possible.” 
– ”Always been involved in football. Somebody helped me when I was playing myself. Think that you have to give something back.”
– ”Payback to the club which has given me a lot of good experiences. My contribution to Danish associations – the voluntary brigade!”
– ”Lifestyle after more than 30 years of voluntary work. Help young athletes to get a good future. This has been my goal throughout the years and has given me a lot of good experiences”
– ”Voluntary work helps in creating a well-functioning local community. For children, it is important to promote active living. And it is also developing you personally. Unity and identity”
– ”For many years, I had children in the club and therefore I am involved in the work. I have enjoyed playing football and would like to give others the same experience. ”
”As a child, I experienced a lot of good things. Now when I have the opportunities, I feel obliged to give something back.” ”Have always been a volunteer in community sport and for more than 50 years. Nice to see things grow and do something good for a lot of people. Not least the social element of the club.  And you get to know a lot of people and build some friendships for life”. 
– ”Have been involved in football for 45 years. Good friends and good network. Be part of making a difference on a voluntary basis”.
– ”For 20 years, I have played football in the same club. To have a good club I also have to take responsibility”
– ”The community and the joy of working with other people who love football”.”Football has always meant a lot to me and I think you have an obligation to contribute to the continuation of football. Every community needs a football club. Everyone should have an opportunity to do team sport which can also be a great foundation for your future life.”

Learn more about our research on football and CSR here: https://www.tandfonline.com/doi/full/10.1080/16184742.2018.1546754

About the Author

Esben Rahbek Gjerdrum Pedersen is Professor at the Department of Intercultural Communication and Management at Copenhagen Business School. He researches CSR, Corporate Sustainability, Non-financial Performance Measurement, Supply Chain Management and Process Management.

By the same author: The Business (and Politics) of Business Cases

Photo by Click and Boo on Unsplash

Why Corporate Sustainability is Bullshit (And Why This is a Good Thing)

By Andreas Rasche.

Corporate sustainability is full of statements, terms, and concepts that are empty, unclarifiable and vague. Instead of rejecting such vagueness altogether, we should embrace it. Bullshit can be productive.

Consider the following statement:

“The concept of shared value can be defined as policies and operating practices that enhance the competitiveness of a company while simultaneously advancing the economic and social conditions in the communities in which it operates. Shared value creation focuses on identifying and expanding the connections between societal and economic progress.”

The sentence is taken from Michael Porter’s and Mark Kramer’s well-known article Creating Shared Value (2011, p. 66).

Now, consider this statement:

“The concept of strategic CSR can be defined as policies and operating practices that enhance the competitiveness of a company while simultaneously advancing the economic and social conditions in the communities in which it operates. Strategic CSR focuses on identifying and expanding the connections between societal and economic progress.”

You are right, I replaced “shared value” with “strategic CSR”. What is interesting is that both statements sound equally plausible. I consider such statements to reflect bullshit, and I am using the term not in a disrespectful sense. I refer to bullshit, because I think we need to be precise.

What is Bullshit?

In 1986, Princeton Professor Harry Frankfurt published a little essay titled On Bullshit in the Raritan Review, which was later published as a book (2005). Frankfurt’s argument was this: While the liar is aware of the truth, but seeks to avoid it, the bullshitter does not care much about the truth. As Frankfurt writes:

“It is just this lack of connection to a concern with truth – this indifference to how things really are – that I regard as the essence of bullshit.”

(2005, p. 33)

The bullshitter deceives others about his enterprise. He does not want others to know that he is not interested in the truth. And, of course, we are all thinking about current US President Donald Trump here. He not only is a notorious liar (The Washington Post has counted more than 5.000 false or misleading statements so far), but also a skilled bullshitter.

“Unclarifiable Unclarity“

Frankfurt defines bullshit with regard to the bullshitter. This is helpful, but it may also be problematic for a variety of reasons (e.g. an assumed intentionality). Others have, therefore, expanded this debate. Cohen (2012), for instance, looks at the bullshit itself rather than the bullshitter. He sees bullshit as statements that are characterized by an “unclarifiable unclarity” (p. 105) – i.e. statements that are vague, airy, and hard to render unobscure. He suggests that when it is possible that key terms within a statement can be exchanged without altering its plausibility, at least a sufficient condition for the existence of bullshit is met.

Corporate Sustainability as Bullshit

Corporate sustainability (and related discourses such as CSR, ESG etc.) are full of bullshit. Actually, the very fact that it is still unclear whether relevant practices are labelled “CSR” or “sustainability” (and that both labels are often used interchangeably), shows that there is a lot of unclarifiable unclarity.

Within corporate sustainability there are at least two sources of bullshit.

First, academics and management gurus produce a lot of it. Recently, André Spicer has offered a sharp and entertaining analysis of such kind of bullshit in his book Business Bullshit (though mostly without reference to corporate sustainability). The mere fact that concepts like “shared value” and “strategic CSR” are exchangeable without any loss of plausibility shows that the discourse is “full of it” (on the lack of distinction between CSV and strategic CSR see also Andrew Crane and colleagues 2014, p. 134). Also, a lot of emphasis has been placed on “transforming business models” in discussions around corporate sustainability. But, the very term “business model” faces a certain emptiness and means different things to different people. I have seen many different interpretations of what a “business model” could be or should be. These are just two examples, but the list is long… just think about “materiality” or “transformative leadership”.

Second, corporations are also in the business of bullshit production. Especially the communication of sustainability aspirations is often based on bullshit. Consider Carlsberg’s recent Towards Zero campaign. One pillar of the campaign is to reduce irresponsible drinking to ZERO. Of course, this is not only an ambitious goal, but a nearly impossible one (also because the company’s control over peoples’ level of responsible drinking is limited). Understood in this way, this broad claim is bullshit in the Cohenian sense – there is unclarifiable unclarity involved. But, most people know that the statement should not be taken at face value; it is supposed to raise awareness and signal a high level of ambition. And this is exactly what can make corporate sustainability as bullshit a productive (and maybe even inevitable) enterprise.

Why We Need Bullshit

Bullshit is a two-edged sword. It certainly comes with a number of problems (and Spicer’s book, which I mentioned above, discusses some of these complications). Also, too much of it, can be dangerous, because it may obscure important pillars of meaning construction.

But, corporate sustainability as bullshit can also be productive. Ambitious statements, like the one by Carlsberg above, have a certain necessary emptiness. The resulting ambiguity can motivate employees and hence change corporate practices, especially as the statement was publicly communicated, which, again, increases the likelihood that others will hold the company accountable (on this see also Christensen et al.’s discussion of Aspirational Talk, 2013). In other words, corporate sustainability as bullshit may spur self-fulfilling prophecies.

“Bullshit sells.”

The same can be said about concepts like “Creating Shared Value” (CSV) or “Strategic CSR”. Their meaning is vague and it is certainly difficult to make them less obscure. Bullshit is built into these concepts, and usually this is a deliberate choice of those people who create and diffuse them. Considering the enormous success of concepts like CSV, we could even say: Bullshit sells! Why? Because the ambiguity that surrounds the concept makes it attractive to a large audience. Firms can bend the concept in ways that fit their specific needs.

So, what is the bottom line? I would say it like this: Let us be clear about when corporate sustainability is moving towards bullshit. Let us also understand the productive nature of such bullshit. But, let us also be aware that “too much of it” can be a major problem for the future of sustainable business practices, both in theory and in practice.

Author

Andreas Rasche is Professor of Business in Society at Copenhagen Business School and Director of CBS’s World-Class Research Environment “Governing Responsible Business”. He is Visiting Professor at the Stockholm School of Economics. Andreas can be reached at: ar.msc@cbs.dk and @RascheAndreas. More at his personal homepage.

References

  • Christensen, L. T., Morsing, M., & Thyssen, O. (2013). CSR as aspirational talk. Organization, 20(3), 372–393.
  • Cohen, G. A. (2012). Complete Bullshit. In M. Otuska (Ed.), Finding Oneself in the Other (pp. 94–114). Princeton, NJ: Princeton University Press.
  • Crane, A., Palazzo, G., Spence, L. J., & Matten, D. (2014). Contesting the Value of “Creating Shared Value”. California Management Review, 56(2), 130–153.
  • Frankfurt, H. (2005). On Bullshit. Princeton and Oxford: Princeton University Press.
  • Porter, M. E., & Kramer, M. R. (2011). Creating Shared Value. Harvard Business Review, 89(1/2), 62–77.

Photo by Bryan Minear on Unsplash.

Is CSR Effectively Altruistic?

By Lot Elshuis.

CSR is the part of a company that focusses on doing good. Interestingly enough, business is all about impact and effectiveness when it comes to the core of the business, but when strategies of doing good are developed and implemented there is often more concern for what sounds good than for the effectiveness and impact of their actions on recipients. Why is the rigor applied to core business activities often not applied to CSR-strategies as well?

Effective Altruism: Maximize impact, not feel-good moments
Effective Altruism takes exactly this approach. Kick-started by philosopher Peter Singer, Effective Altruism is a community that wants to change how ‘doing-good’ is often approached. First of all, Effective Altruism emphasizes that most people in developed countries, and especially those belonging to the richest 10% of the world population, have an outstanding opportunity to do good. We have won the lottery! Therefore we have the beautiful chance to add value to the lives of others.

Second of all, if we indeed want to take the opportunity to do good, we can do the most good by focusing on maximizing positive impact through applying scientific evidence and reason, instead of only looking at what sounds and feels good. Without thinking carefully about how exactly to do good, there is a risk of wasting important resources on things that do not work. Even worse is having the idea of doing good, while actually causing harm.

The Case of Play-Pumps International
Let me give an often-used example. Many developing-world communities are provided with water through hand-pumps. The social enterprise Play-Pumps International had the idea to replace these hand-pumps by merry-go-rounds, which would pump up water while children played on them. It seemed to be the ideal win-win situation. The enterprise received a grant from the US Government, a World Bank Development Marketplace award, and (it can’t get much better) a visit and sponsorship from rapper Jay-Z. However, sadly enough, the Play-Pumps didn’t have the positive impact that everyone assumed it had. One of the main problems was that the pumps needed constant force to obtain the water, which, obviously, made the kids tired. This often compelled the women of the communities to struggle to push the pumps. Moreover, the Play-Pumps were several times the cost of a hand-pump, which were able to pump more water an hour as well. (see Doing Good Better by William MacAskill for a more elaborate description of the case)

Rule of Thumb: Importance, Neglectedness, Tractability
Although Effective Altruism is focused on the individual who is willing to do good, we could apply the same to corporations who pursue CSR or social entrepreneurial strategies. Especially because effective altruists often focus on the cost-effectiveness of a cause or approach. This line of thought shouldn’t be unworldly to corporations, since cost-effective rationalizations are applied on a regular basis. An often-used rule of thumb by Effective Altruism for evaluating causes or approaches is assessing the following criteria:

  • Importance: What is the scale of the problem; how many people are affected and how deeply?
  • Neglectedness: Is there still enough opportunity to do good, or are a lot of other people already working on improvement in this field?
  • Tractability: Is there something practical you can do, with the possibility of succeeding?

By applying these criteria and looking for evidence through research, companies are likely to have a more profound impact on the area in which they want to do good.

Responsibility – but where?
As the name says, CSR is about responsibilities. Therefore, we might wonder whether companies who apply CSR actually have the responsibility to do the most good they can (with the same amount of time and money). Can we argue for saving lives in the poorest countries instead of improving the labor conditions of the workers in one’s own supply chain? While the former has a bigger impact, the latter might, to a greater extend, be in line with the more obvious responsibilities of the particular company. This is an interesting discussion, but unfortunately outside the scope of this post to deal with.

However, a lot of multinational organizations are already involved in causes that do not directly relate to their own supply chain. Google is for example awarding $1 billion in grants and contributes 1 million employee volunteer hours ‘to create more opportunity for everyone’. More specifically, H&M announced in a press release in September that they are donating $200,000 to Save the Children for “South Asia’s worst flooding in years”. From an effective altruist perspective, it would be rational to figure out, what the scale of this cause is at the moment, if there aren’t already a lot of other donors involved in this particular disaster relief in South Asia, and whether Save the Children can actually do something successfully about the situation of those affected by the floods. Accordingly, this could be compared to the measured impact of other causes to conclude where H&M’s, or Google’s, resources would be most valuable.

Impact before Marketing!
We all know that CSR is more often than not linked to marketing strategies. There is a high chance that H&M chose to donate to South Asia’s flooding because more potential consumers will be affected since they probably have heard about the flooding recently and were emotionally moved. However, this doesn’t have to pose a problem, because Effective Altruism is not per se about ‘selflessness’, although often used as definition for altruism. It is totally fine to feel good about doing good. In fact, it would be wonderful if everyone felt better by doing good, because then it is likely that more people will actually do good. Therefore, it would be all the more impactful if organizations started to market the impact of their causes, rather than doing and marketing what feels good. With that, consumers could support companies that do good effectively, instead of companies that scream the loudest without having a real positive impact on important cause areas.

Lot Elshuis is a MSc Candidate in Business Administration and Philosophy at Copenhagen Business School. With a background in philosophy, her research interest is focused on discussions about the role and responsibility of business in society and the ethical dilemmas that these discussions entails. You can contact her on LinkedIn.

Pic by Diego PH, unsplash.

 

Adventures in Materiality. Notes from the first CBS Sustainability Seminar

By Steen Vallentin.

  • On October 31, 2017 the new CSB Sustainability seminar series was launched
  • With a room full of practitioners and academics, the topic “Materiality and Quantification” in CSR and sustainability reporting was discussed
  • Diverse input for discussions were given by presentations by CBS, DTU and a practitioner in corporate sustainability reporting

Approximate reading time: 4-5 minutes

All we need is Materiality?
Materiality is arguably gaining significance in corporate approaches to CSR and sustainability. While strong narratives remain important, they do not suffice in a world filled with increasing amounts of data calling for transparency and factual assessment of corporate accomplishments, progress or decline. There can, however, be a price to pay for an increasing reliance on metrics and measurements. What happens to ethical and moral concerns, to fundamental values and the sense of overall purpose if CSR/sustainability is reduced to a technical matter of taking numbers and ticking boxes? This was the topic of the first in a new series of CBS Sustainability Seminars. Here is some background on the topic and the seminar series, plus some notes on the presentations of the day.

The rise of materiality in CSR and sustainability
Sustainability reporting and efforts to assess the materiality of corporate responsibilities toward the people and the planet are undergoing interesting transformations these years. Not only is sustainability reporting becoming a more and more widespread practice internationally, due to mandatory disclosure requirements and the institutionalization of standardized reporting formats such as GRI and integrated reporting. We are also, among other developments, witnessing corporate efforts to integrate adherence to the UN Sustainable Development Goals into non-financial reporting formats, including materiality assessment, and companies committed to set and communicate science based emission reduction targets (see Science Based Targets).

The new cbsCSR sustainability seminar series: research-based & multidisciplinary
Hence, “Materiality and Quantification” was an obvious choice as topic for the first event in the new series of CBS Sustainability seminars that will be taking place from the Fall of 2017 and onwards. The inaugural seminar took place on October 31 and featured three speakers: Professor Andreas Rasche from CBS, Frances Iris Lu (CBS and Maersk) and associate professor Niki Bey from the Technical University of Denmark (DTU).

The purpose of the seminar series is to forge closer ties between researchers at CBS and professionals from companies and organizations – to enable collaboration and easier access to each other’s knowledge and resources on an ongoing basis. And to build stronger relations among researchers at CBS. The USP of the network is that it is research-based and multi-disciplinary. One aim is to help bridge divides between knowledge silos and facilitate dialogue between different knowledge disciplines. Another aim is to broaden the scope of how we think and speak about sustainability, and to explore how far we can take this concept – in different  indicated by its three pillars: environmental, economic, social. To this end, the seminar series will present many speakers from CBS and other research environments that would not ordinarily see their research as part of a sustainability agenda.

Materiality assessments are no moral assessments
In the first seminar, however, we were on familiar ground with regard to sustainability. Based on a forthcoming research paper (using data from the Netherlands and co-authored with Koen van Bommel and André Spicer), Andreas Rasche showed how sustainability reporting has gradually developed into being a more and more standardized and technical practice. A key concept in this research is commensuration, which refers to the process of transforming different qualities into a common metric. It reduces and simplifies ‘thick’ information into metrics that are comparable to other metrics. Over time, commensuration stimulates a standardization of the meaning of sustainability. When something is turned into a metric and standardized, it often leads to a crowding out of moral questions and concerns. Subsequently, sustainability reporting can be a driver of ‘amoralization’ processes by which questions of morality, values and purpose are replaced by technical performance measures. On the one hand, this technical and instrumental turn can be part of the explanation for why sustainability reporting has become so popular (because it sidelines ambivalence and difficult moral quandaries). This need not be an entirely negative outcome, as pointed out by a participant, because it can be an indicator of increasing business integration of sustainability. We do, however, on the other hand, need to be aware of the possible downsides of this proposed ‘technicalization of sustainability’.

Moving beyond ethical idealism – the price to pay for conquering the mainstream?
While this finding is based on a longitudinal empirical study, I have made a similar point in a conceptual paper reflecting on the effects of instrumentalization in the realm of CSR more broadly. To quote myself (at length):

“As a result [of instrumentalization], it is now all too easy to speak of CSR without making any mention of ‘ethics’ or bringing up moral issues or dilemmas; a development that can lead to a strangely depersonalized understanding of responsibility and which raises questions about the relevance of ethics for CSR altogether. Whether this is a problem or not is of course debatable. On the one hand, it can be considered as a sign of progress in the sense that the CSR debate (and CSR as corporate practice) has decidedly moved beyond ethical idealism and the subjectivity/arbitrariness that may be associated with individual values and choices. CSR has developed into a socially embedded, highly institutionalized and material phenomenon. On the other, it is worth pondering what, if anything, has been lost on the path to (apparent) victory in the public realm of ideas. Is the displacement of ‘ethics’ a sign that the responsibility discourse has lost its normative bearings and that this has been the price to pay for conquering the mainstream?”

A practitioner’s perspective on values & materiality: We can have it all – (can we?)
Frances Iris Lu gave a presentation of the evolution of materiality and materiality assessments in recent years, drawing on her experience from KPMG and Mærsk. She showed how materiality assessments can often, in practice, be rather loose exercises bereft of analytical rigor, but also how it is possible to add more rigor to the process. One key feature (and possible limitation) of a conventional materiality assessment is that it tends to focus strongly on the risk as opposed to the opportunity side of responsibility, making it difficult to reconcile with policies aiming to create (shared) value.

To bridge this gap, and to make room for the company values in the account of materiality, Mærsk has created a new ‘materiality beyond the matrix’ model. Frances presented this new and more comprehensive and multi-faceted model which accounts for materiality under the three headings: Risk, Shared Value, and Responsibility. Challenging the amoralization narrative presented by Andreas, Frances argued that we are seeing a sort of pendulum swing taking place in sustainability right now where values and purpose are getting more attention – alongside the continued focus on metrics.

Materiality and Quantification in practice: The Life Cycle Assessment Lens
Finally, Niki Bey brought the quantification of sustainability through Life Cycle Assessments (LCA) into the discussion. LCA is used as a general framework to avoid the problem of cost shifting across impact categories (e.g. using less plastic might ultimately increase food waste). Although the LCA is never completely objective, we need to try to approach matters of sustainability systematically and to focus on available facts – how far can we get in terms of what we know and what we can measure, instead of focusing on subjective criteria.

A participant mentioned enthusiastically that the LCA is the most important decision-tool she has ever worked with because it makes people able to move up and down in perspective and allow them to see the bigger picture in regard to sustainability and corporate responsibilities. While LCA is usually applied as a relative measure that can be used to compare and choose between different courses of action, it can also be applied in an absolute fashion, as with the Planetary Boundaries.

Overall, the seminar brought out as many questions as it did answers. We look forward to continuing this and other adventurous discussions in future CBS Sustainability seminars.

Steen Vallentin is Director of the CBS Centre for Corporate Social Responsibility (cbsCSR) and Associate Professor in the Department of Management, Society and Communication at Copenhagen Business School.

Pic by Miguel A. Amutio, edited by BOS.

CSR is Dead. Long Live CSR

By Andreas Rasche, Mette Morsing, and Jeremy Moon.

We – Andreas Rasche, Mette Morsing, and Jeremy Moon – just edited an international textbook entitled Corporate Social Responsibility: Strategy, Communication, Governance (Cambridge University Press). When talking to people about the book, one common response was: “Why didn’t you just call it Corporate Sustainability? After all, this term is used by everybody these days…” In 2014, Peter Bakker, the President of the World Business Council for Sustainable Development, even declared: “CSR is dead. It’s over.” And Michael Porter and Mark Kramer made a very similar claim when pitching their “shared value” concept a couple of years earlier.

Mr Bakker’s main point was that CSR is mostly about philanthropy and that it is not properly embedded into business models yet. It is hard to disagree with this statement, but nevertheless neither Mr Bakker nor Mr Kramer and Professor Porter got to one point:

The core of the problem

First, if you do not have an antique understanding of CSR (as preached in the late 70s), you will recognize that it actually is about integrating firms’ social and environmental responsibilities in their value and supply chain activities as well as their business models. This is precisely what the entire debate on “strategic CSR” has been aiming at. Those companies who understand CSR in a contemporary way know that they have to integrate their responsibilities vis-à-vis society into everything they do; and this is not necessarily because they are environmentalists or social protagonists but because this is what society expects from them and this is what provides them with their license to operate.

However, simply changing labels from “CSR” to “Corporate Sustainability” won’t make firms more aware that their business models need to be aligned with their responsibilities vis-à-vis society. While Corporate Sustainability may enable a smoother dialogue between management scholars and economists and while it may also help to engage in dialogue with peers from the natural and technical sciences, it also blurs the importance of firms’ ethical responsibilities. In fact, one could argue that while the Corporate Sustainability language has increasingly helped to engage the investor community into what they label Environmental, Social and Governance (ESG) issues, it has also sidelined important ethical dilemmas that were once at the core of the debate.

Second, we should not too quickly disparage corporate philanthropy as an outdated concept. Currently, philanthropic contributions are a key driver of many partnerships in support of broader development goals such as the UN’s Sustainability Development Goals (SDGs). Also, philanthropic contributions are often quite “strategic” – many firms directly benefit from such contributions, such as when charity investments in education secure a skilled future workforce. Also, many SMEs make strong philanthropic contributions to the local communities around them – for them CSR is a matter of personal values (often driven by the owner-manager).  Yet, this can bring benefits of employee motivation  (as, somewhat paradoxically, even Milton Friedman noted), social marketing and customer loyalty.

The bottom line: rationales, not labels

The core of the problem lies not so much in labels. It more profoundly lies in the challenges that systemic injustice, corruption, human rights and climate change pose for society and for business, and the resources and strategies that businesses bring to address them. Therefore, we should not focus too much on labels – labels come and labels go. But we should rather focus on ‘rationales’.

Actually, Chapter 2 of our book makes exactly this point. Corporations are often quickly relabelling and repackaging their engagement with responsible and sustainable business. What was formerly described as ethics was translated into CSR and now turns into Corporate Sustainability. In the future it may be given even another name. This is not to say that corporate practices are not changing. Actually, there is a lot of innovation around corporate sustainability and many firms have learned a great deal about which material issues need to be addressed. It is to say, however, that we should not simply throw away the “old” and believe that the “new” will be the Holy Grail.

In this sense, editing a textbook on “Corporate Social Responsibility” is a very timely undertaking. We cannot ignore the big societal challenges that are ahead of us, and by educating the business wo(men) of tomorrow we have to acknowledge that firms’ responsibilities have to be deliberately managed, regardless of whether we call this “CSR”, “corporate sustainability”, “shared value” or something else. We hope that our book will convey exactly this message.

CSR is a continuous journey

The point for us is this: Responsible and sustainable business has to be alive in our minds; it has to shape what we do, how we do it, and why do it. We have to look beyond and behind the different labels we ascribe to responsible business behavior. Truly engaging with a book is but one of the many important ways to achieve just that… CSR is a journey that has just begun and that continues to unfold on a daily basis.

Long live CSR!

Info: The book “Corporate Social Responsibility: Strategy, Communication, Governance” edited by Andreas Rasche, Mette Morsing, and Jeremy Moon is available from 17 March 2017.

Andreas, Mette and Jeremy are editors-in-chief of the BOS Blog and Professors at Copenhagen Business School’s World Class Research Environment Governing Responsible Business.

Poster by Cambridge University Press.