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Archive for the ‘transparency’ Category

I know… I don’t blog enough around here anymore. Okay, I don’t blog around here at all. Watch this (empty) space. I will be back soon and regular. In the meantime, I do blog over at CSRWire more regularly. See below the latest one over there where I looked into my sustainably made crystal ball and imagined the strange (un)sustainable world of tomorow.

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No, this is not another “looking at 2014” piece. I am more interested in looking a little further ahead. The world we live in has changed dramatically over the last 10 years and there are larger trends changing the world in ways we can hardly imagine.

Imagine, for example, if we somehow had better insight into how transportation will change across the world over the last 50 years. Or how manufacturing will shift away from the U.S. and other developed countries or how the brands we love dissolve into nothing more than grand design houses with limited manufacturing capabilities. Not to mention how technology has changed the world – wish there was an app for all that.

I’m more interested in the mega trends that will shape our world over the next 50 years. What will drive the fundamental change in the way we source, manufacture, interact, communicate, build relationships, sell, transport etc.? In short, here are four mega trends that I believe will change the world of sustainability in a way that makes most of what we think is important today silly and obsolete.

Well, we’re done with the silly season after all…

1. Everything Is Personal

The rise of the individual over the group has in itself become a group activity. The marketplace of people has become so crowded that people are fighting to stand out. We have moved from the Pepsi Generation to the Me Generation. From consumers to individuals. This is already challenging the way brands interact with people, as people want to be known as Jane, Dick and Sipho – the individuals. They want brands to conform to them and not the other way around.

Brands who want to survive must find a way to engage in a conversation – a dialogue – where they are informed as much as what they inform. In other words, get ready to lose control of your brand to save it. As the new Edelman brandshare™ study shows, brands who ignore this new sharing revolution do it at their own cost. By losing control and allowing your own brand to become individualized you will empower individuals to love you, connect with you and advocate on your behalf.

At the same time, you will also lose control of what your brand looks like. Conversations with consumers won’t stop at Likes. They will want to be part of the design process. In many cases, they already are – go design your own Timberland boots or Nike’s today.

This mega trend will also influence how companies implement sustainability across their value chain. As technology and transparency make the world smaller, consumers will be driven toward making everything personal – and leveraging the power to know where their purchases came from, i.e., manufactured, sourced, farmed, etc. It’s already possible – we can trace coffee, wine, water, cocoa and even diamonds to any specific location today. And this is already playing out in the marketplace with sales of fair trade coffee outstripping the sales growth of traditional coffee.

As individuals design their own products they will also have the ability to pick the ingredients and/or materials, enabling them to make ethical choices from the source right through to disposal. As a brand, your ability to control your supply chain will thereby become even more important – because your consumer will drop you if you can’t give her the right goods to make your product.

2. Two Classes

Income inequality is growing faster than ever before. The rich aren’t just getting richer – they are getting richer at a rate that is bad for the U.S. and global economy.

Simply put, income distribution in the U.S. and in the world is unsustainable. This isn’t an ethical issue but a sustainability issue. I am not making a judgment call on whether the rich should or should not own as much as they do or whether CEOs should get paid as much as what they do – I am merely looking at the impact of this fast growing income inequality. The impact hampers economic growth and, as the fall of the Roman Empire showed us, huge income inequalities are bad for countries. Today, the U.S. has a worse level of income inequality than the Roman Empire.

The long-term solution? Either get rid of it or find a way to ignore it.

The problem with the rich in Roman times was that they could not find a way to cut income inequality. They gave a little bit away but never did enough to change the underlying systemic problems and reasons for income inequality. The same is happening today in the U.S. and the world.

Universal health care gives the poor(er) a little bit of breathing space but does not challenge the nature of the economic system and the underlying challenges: an obsession with fast growth, short-term investors addicted to high profit margins irrespective of values, too-big-to-fail industries and companies rewarding high risk takers, and a reward system that encourages investors and business leaders disconnected from long term business and societal needs.

This growing income inequality isn’t just a widening of the gap between the rich and poor but, more importantly, changing the nature of the middle class. The middle class has always been the bridge of hope between the poor and rich but now they are carrying an economic burden beyond their means and fast losing pace with the rich.

The new class system, unfortunately, isn’t between rich and poor but rather those who benefit from the system and those who “hang in there.”

While clearly unsustainable, there is little that can be done within the current economic system to alleviate this trend. The result: people will become even more entrenched in their class, defining their needs and wants according to their economic status – an acceptance of life rather than striving towards a new economic class.

However, this financial divide will also create a different kind of economic and social divide. Where you live, eat and play; what you buy and watch; and who you interact with, will increasingly be decided according to where you fall in this economic divide, creating a need for economic and social systems that can cater to both societies. You already see this with where people shop, what they drive, where they eat, what they watch, buy etc. Expect this trend to increase even faster over the coming years.

Examples can already be seen in the fast growing sharing economy as growing income inequality creates a new economic model that encourages sharing resources for financial gain – aided by developments like the growth of social media and the move toward cities. Uber, Sidecar, AirBnB, etc. allow anyone to start their own business and make it personal – but I bet their target audience isn’t those who buy Ferraris or who stay at the Four Seasons.

It is, in fact, a combination of all these trends that is leading to a major shift in how people are adapting the capitalist system to address their needs – but away from the big business model. And regardless of the outcome, it is clear that the impact will change the very nature of business in years to come.

3. 3D Printing

Like the stories of rock bands, the instant sensation of 3D printing has been 30 years in the making. While, the discussions today are about immediate controversies such as printing guns, the real disruption with 3D printing will be the ability to print stuff we use every single day – it is already printing apparel and footwear and food, and even human organs!

Imagine the future in 50 years when we will be able to print everything we need from our homes or local 3D print locations. Our food, clothes, furniture, even replacement organs and everything in between. The challenge is not the technology but the delivery of the “ink” to the printers. Traditional transportation methods – trucks and trains – won’t be able to keep up with the demand, likely leading to delivery via pipes and cables, much like gas and water today.

While 3D printing has the potential to have significant impact on infrastructure development and transportation, we are decades away from fruition. Today’s infrastructure is not geared toward delivering the world of tomorrow. Expect a transformation of cities and how we live and move around, which will lead to enormous changes across supply chains globally.

With people printing their Levi’s or Timberland’s or even the Big Mac at home, raw materials will be able to skip the middleman – the manufacturer. In other words, 3D printing will complete the move from brands controlling both design and manufacturing to becoming nothing more than design houses.

4. New Generation Gap

The last mega trend is the way social media is changing how we experience information and form relationships. There is a new generation gap between those who see new technologies and social media as an additional way to communicate and interact and those who see it as the only way to communicate.

Social media does not replace personal experiences or the importance of building physical presence to start a relationship – it enhances those relationships. It is an additional way to stay connected with your “network” no matter where they are. And, of course, another way you can consume.

But the younger crowd experiences this new social world differently.

For them the new technology is a natural extension of how they make friends and interact with the world. A snapchat is as good as a handshake. The need for physical interaction is not necessary any more to build trusted relationships anymore.

This is a huge shift in how humans have developed relationships and organized themselves. The suburb of tomorrow has gone digital – a place where people go to be with their own community. And then they step outside (if they really have to) to go to work. Social media, like little else, will change the landscape of tomorrow completely. Mega cities just need to connect to us via wireless. We can order cars through a sharing app. Work is a video away.

In other words, social media confirms the move to the personal and will challenge how we organize our social, economic and political systems.

So what will the world of tomorrow look like? Will it be a world of selfish individuals printing their ideal partners at home in their connected mega city apartment? Or will it be one where the individual is celebrated as making up this new connected world where we share what we can eat and print?

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 Is to make money right? Absolutely yes, but let’s not kid ourselves – there are rules. It’s not as if you can just do what you want to do. The “free market” might sound like a pretty neat idea but that only exists in theory. If markets were truly free we wouldn’t have all the subsidies, incentives, trade limitations etc that almost all companies benefit from or lobby for in some or other way. All markets are regulated to ensure that they serve a purpose. A social purpose that goes beyond shareholder gains only.

Do companies seriously want to debate this? Then give back your subsidy. Drop the demands for more favorable trade rules. Your business is about making money within a set of rules. Live with it even when all those rules don’t slap you on the back and give you money.

Some rules are written into law and you have to comply to them. But some rules are unwritten – the social contract you have with society as a whole.

Let’s put it in another way. We have laws regulating individual behaviour. These laws did not come from nowhere. Before they became written law, they were the unwritten rules we had as a society to organize ourselves and somehow get us to live in some sort of pact – harmony being a dream only. Before we wrote down a law that said – don’t kill, murder etc – we had that as part of the societal contract. It was a societal contract governing our behaviour. One that organized how we lived with and amongst each other and the roles and responsibilities each of us had towards each other and ourselves. We “gave up” our freedom to pillage and burn to gain from living with each other. A societal contract that defines and creates society. One that helped us move forward as a specie instead of going off driving individual gain only. There are and were many of these societal contracts to help drive cohesion. Stealing, murder, property rights, trade etc.

It’s the same for business. There have been unwritten rules of engagement – the societal contract to ensure that they serve a broader positive societal role and not purely out for personal gain. For example – Rule one, don’t sell me snake oil. And eventually that made it into law. Don’t sell me food that will kill me. That eventually became law. All of these regulations are there to underscore the societal contract that existed before the actual law was written.

And like any law, it became more complicated the longer we lived together as a society. Those who don’t value the societal contract will try to find new ways to break it to stay within the written law or even change the written law. But because they are breaking the unwritten societal contract, we need to rewrite and bring in new written laws. Take killing for instance. It was pretty simple, you shouldn’t kill someone else. Well, what happens if it was by accident? Or in self-defense. Oops, let’s expand on that law a bit. And it becomes more complicated each day as people and companies try to find new ways to break the societal contract by finding ways to undermine the written law. (I wonder if these ‘complications’ with writing the societal contract into law were the first example of lobbying as well?)

Business cannot just operate the way it wants. It serves a societal need whether it is bringing the goods we need to us via a retail shop or provide us with the fuel we need to keep us warm or just get around. It does not have the freedom to do what it wants to do for the sake of itself. It must serve a purpose (real or perceived – thank you advertising) and play within the written and unwritten rules. You can’t exploit workers for the benefit of your bottom line. You cannot dump toxic materials into the water streams used as drinking water just because it is better for your bottom line. You can’t knowingly sell a product that will kill people even if it does help your bottom line. You can’t lie to people about what your product does just to increase your bottom line. You can’t use your bottom line as the sole reason why you do something – legal or illegal. That bottom line is not always in the interest of the bottom line of society – to live and prosper.

The unwritten rules and social contract with society is based on trust. People trust that you will do the right thing. It’s why people tend not to like government regulating behaviour – it not only creates the perception that it limits freedom but it goes against the principle of trust. And, of course, government will argue that these laws are there to serve the societal contract and ensure (consumer) protection from those who refuse to work within the spirit of the societal contract. The societal contract is based on trust. But lobbying behind their backs to “get away with it” because of greed or any other reason breaks that trust. The trust is broken when companies lie about their impact and when their impact is not beneficial to society – today or tomorrow. Especially if the company does it on purpose – knowingly. When you break that trust you break the societal contract. Then you cease to have a reason to exist. It’s not in the interest of the societal bottom line.

So, the business of business is to make money but only within the confinements of the societal contract – written or unwritten. The next time you lobby for something that is in the best interest of your company or you hide your true impact or your falsely advertise the benefits or impact of your product or service, do ask yourself if you are breaking the unwritten contract that you have with society.

Do you serve a purpose that is beneficial to society? And please refrain from drinking the Kool Aid. Think before you drink. Consider the truth before you answer. Because you are also a member of our society.

The business of business is to serve a societal purpose. We love it when you make money while doing this and we see this as the reward we provide you because you are one of us and doing something good for all of us. Now go and have a purpose. A real one.

So the next time you use the line of “the business of business is business” or argue against CSR or sustainability – please think again. Your responsibility might lie with your shareholders but your licence to operate lies with us. The people. CSR and sustainability is our way of defining the rules for you. We don’t expect you to like it but that’s the way the cookie crumbles. Live with it. Implement it. Embrace it. Or maybe we’ll just have to revoke your licence.

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Can you remember the first time the two of you got together. The stolen looks, the uncomfortable moments of silence, the tripping over your sentences, the sweaty palms, the he-likes-me-he-likes-me-not thoughts, the private meetings when no one was looking, the uncomfortable first meal together. Yes, I am talking about stakeholder engagement. Just as with any relationship in the early wooing and courting stage, stakeholder engagement is never easy at the start.

Most companies just don’t know how to talk to activists and campaigners. Hey, make no mistake, activist hardly knows how to talk to companies either. But they don’t need companies to like them as much as what companies need them to like them. Or at least leave them alone and not target them.

Don’t feel bad when they target you. It happens to the best of companies. Sometimes it makes sense and sometimes not. I remember seeing an anarchist kicking a Nike sign at the battle of Seattle in ’99 – while wearing his Nike shoes and top…

But there are a few tips you should follow if you decide to engage and start courting. This is not an exhaustive list. Just a few tips to get you through those first uncomfortable early stages of stakeholder dating.

Firstly, do your homework and find out a bit more about the NGO and what it regards as its ‘bottom line’ – it is unlikely to be financial! I was invited to speak to the global affairs team of a very large pharmaceutical while I was at Oxfam (I headed up the Access to Medicine Campaign for a while). I was shocked to hear that the majority of people at the company thought that Oxfam only worked on health issues. And this happened when Oxfam was in the middle of their Coffee Campaign! Dig around a bit first and find out what the NGO does and what is their mandate. Most of them are registered with a constitution that states what they should focus on and how they should work. This will help you understand whether there is any potential for a longer term constructive relationship – or just a one night stand. Also a good tip when you start dating – know who you are dating. Except if you like blind dates.

Secondly, respect the differences between NGOs by not lumping them all together in the same room for a consultation exercise – NGOs are proud and competitive too. You wouldn’t want them to call a whole bunch of companies together and still expect special treatment just aimed at you. You should respect their differences and treat each one differently. Rather meet each one separately in an environment that works best to put them at ease. Meet them where they feel most comfortable – maybe at their place. Especially if you want to build the foundation for a long-term relationship. And even this should work best for real dates – don’t bring all your prospective dates together in the same room. They might just start sizing each other and you will be left with no date at all.

Thirdly, don’t make the mistake of thinking that you are the only company that is the target of the NGOs campaigning efforts, or that the NGO hasn’t other programs and projects that may have nothing to do with business. Just as with the large pharmaceutical company I mentioned, most NGOs have numerous focus areas and different programs and projects to try and achieve their overall goals. And most large campaigning NGOs have various campaigns going at the same time. They might have one single broad focus, but it plays out in different campaigns and programs. For instance, Greenpeace might be about the environment, but they focus on climate change, oceans, forests, genetic engineering and nuclear issues. So your company might only be a small part of their focus and interest. Same with real life dating. A friendly smile does not mean they want to date. It might just be a friendly smile.

Fourthly, start by talking, learning about each other and building trust rather than starting by expecting ground-breaking strategic partnerships. There might be a few obstacles to overcome – perceptions of what ‘big business’ is all about and a feeling that you want to ‘clean’ yourself by associating with them. Take it easy and just talk. Let them get to know you. Don’t create expectations. Just listen and learn and see where this might take you. Again a good tip for real life dating as well. Don’t ask them to marry you or expect ‘the commitment’ on the first date – it might just scare them off.

Lastly, remember that cash does not necessarily have the same currency as it does when buying products or services from other companies. First and foremost NGOs want to affect change. But they don’t always see money as the way to achieve change. Yes, some of them have huge budgets and operate like multinationals. But they generally have strict guidelines on receiving money from companies. For instance, Oxfam will not accept money from companies that fall within an industry they target in their campaigning. They might not even accept money for travel – never mind for a program. They would rather see you ‘do the right thing’ than pay them to do something. Okay, this one is less relevant for real life dating. Money generally impress prospective dates!

Okay, one more tip. Don’t expect them to agree with you on everything. And don’t make this a prerequisite for your potential relationship. I love my wife to bits. But we only agree 80% of the time. But we don’t let the 20% of the time we disagree define our relationship. No. Focus the relationship on what you have in common and don’t get stuck on the differences. It’s part of being human – we are all different. And the same for companies and NGOs – we are all different. And I learned that I am wrong 20% of the time in any case. Just ask my wife.

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It feels like 1990 all over again. How many times do we go through these arguments that CSR is dead or CSR isn’t a very good description or that CSR is so yesterday. It seems as if we are back at the drawing board again. First we had Aneel Karnani make his Case Against Corporate Social Responsibility in the WSJ last year. Then we had Michael Porter and Mark Kramer argue in the Harvard Business Review that CSR is an old concept and that the new way forward is CSV – Creating Shared Value. And now we have Alberto Andreau arguing that Shifting From CSR To CSV Isn’t The Solution and that the truth and future lies in Corporate Sustainability. Oh boy, here we go again…

I won’t go into detail into Dr Karnani’s argument. It has been dealt with from all angles and most agree that he missed the point a bit. What he perceives to be CSR isn’t CSR but only what some companies claim to be CSR. He was working with the concept of CSR as practiced maybe 20 odd years ago but CSR and CSR practices today have changed dramatically. His definition and understanding of CSR was wrong and his argument therefore based on the wrong assumption. But what about Porter and Kramer, and Andreau? I would argue that they are making the exact same mistake as Dr Karnani. They are using a definition of CSR that is outdated and their understanding of CSR is based on what CSR was 20 years ago – or maybe even closer to 5 or so years ago.

Let me first say that it is an excellent piece. They capture the latest thinking and practices of CSR very well. Unfortunately they then argue that this is CSV and not CSR. It’s not, it’s still CSR. And what they propose isn’t completely new either. Those of us who have been working at the sharp end of CSR have been working on a similar concept and approach for a few years already but we didn’t call it shared value – we coined mutual or co-responsibility. The idea of mutual or co-responsibility is that (leading) companies should focus their CSR on those areas where they share an impact and opportunity with key stakeholders. Starbucks can focus on the cup when they deal with consumers and on sourcing when they work with farmers – helping consumer have a better impact and helping farmers increase yields, get better prices, be more sustainable etc. Levi’s helping consumer limit the impact of their jeans and working with farmers in farming cotton. Best Buy recycling or even buying back older technology. And many more leading companies share this approach to CSR.

Furthermore, we’ve focused more specifically on key stakeholders and not society as whole. There is a reason why – society is too broad a concept for a company to focus on. Break society into the various stakeholder groups and be specific in who you target – key stakeholders such as consumers or suppliers or investors or regulators or your local communities or even distant communities. The more targeted you are the better the chance of success. Of course you should always target more than one stakeholder but try to be as targeted as possible to know exactly where the shared value or mutual responsibility/opportunity might be. CSR works best when it is targeted.

Back to the meaning of CSR…

CSR has changed it’s meaning and how it is used substantially since the 1970s. It started off as all about compliance and pressure from activists for expand on their philanthropic commitments. But today it is as diverse as the concept of business. Business isn’t a singular description anymore. It describes anything from a large multinational company with a diverse set of products to an informal trader working in the streets of a township in Africa. It’s a bit like pornography – we know it when we see it.

Let’s define CSR quickly to provide some clarity. This isn’t a perfect science as we don’t have a single agreed definition. Mine is simple and I don’t claim this to be the final definition of CSR: CSR is the way an organization manages and communicates its impact on society and the environment. Simple. But it is this simplicity that hides the complexity and diversity of how we practice and implement CSR.

Porter and Kramer make the same mistake that Dr Karnani did by not recognizing the diversity within the CSR field. Some practice CSR in the risk management, compliance and/or philanthropy way they explain it and other practice CSR in the shared value way they explain CSV. It’s the nature of the beast – CSR is not a single discipline that covers every single company in the same way. Each company and industry focus on it in a different way. For example, for pharma it makes sense to focus on philanthropy because it is in the nature of the product(s) they offer. It makes sense to donate products to people who can’t afford it – or else they die. As simple as that. It doesn’t mean they don’t focus on other areas but their priority focus will most likely be around philanthropy – and at the core of their business: finding new drugs to help us deal with our health challenges. For companies such as Starbucks it is very different because they focus on consumers and farmers. They help farmers improve their practices and pay a premium price and help consumers improve their impact by offering recycling and encouraging them to use tumblers. Companies and industries are diverse in how they practice CSR. At best it focuses on those areas where their products or service intersects with society – and where the greatest societal needs intersects with business opportunities (or responsibilities).

(Of course we learn from different practices and improve on it but it is always unique for each company – or should be – as it should focus on the specific value the company offers through it’s unique products and/or services and brand and corporate identity.)

Some companies just do not have a shared value with society – or they have a very difficult case to make. For example, tobacco companies can build a solid case of shared value in their sourcing practices (and some do) but they will have a difficult case to make for shared value with the broader society. And the same goes for arms dealers/manufacturers, some military contractors etc.

Shared value is also limited by the timeframe and current knowledge. If we look at societal needs and shared value today then it makes perfect sense to provide a society suffering economically the cheapest fuel and energy. But we know that this will have a negative long-term impact. Shared value shifts and moves with time. What might be a shared value today is another issue to deal with tomorrow.

The idea of renaming CSR to CSV because of the perceived new way is futile. The debate continues each and every day and was at a height 5-7 years ago when some CSR practitioners (like me) argued that CSR has changed from compliance to differentiator and should therefore be renamed because it is now about business opportunities and not compliance-led responsibility. I was wrong back then. I confused the definition of CSR with the practice of CSR. And this is the fundamental mistake of Porter and Kramer. And Karnani and Andreau. They confuse the definition of CSR with the practice of CSR. The practice of CSR is complex and diverse – adapted to the needs of the complexity of business and flexible enough to continue to adapt and change with time and knowledge.

CSV isn’t the new CSR. It is a way of practicing CSR. I would even go so far as to say that it is the ideal way of practicing CSR – finding the shared value with society (or specific stakeholder groups). But it isn’t something different from CSR. It is how some practice CSR. And a damn good way to implement CSR if it makes sense for a company to do so.

As for Andreau – the same argument holds. Corporate Sustainability is just another way of practicing CSR.

Of course a major flaw of Anfreau’s argument is his argument that we need to widen the meaning of sustainability to ensure it covers everything he wants sustainability to stand for. Why is it acceptable to adapt the meaning of sustainability but somehow not acceptable to do the same with CSR? Actually, I am not asking for a change in the meaning of CSR but only a recognition of its complexity. I agree with his call for simplicity but I don’t think that changing the name will help. The simplicity lies in the earlier definition of CSR I gave and the complexity in the execution.

All the points made by Andreau is as true of CSR as of Corporate Sustainability: It’s a business approach; it seeks to create long-term value; it embraces opportunity; and it helps manage risk. Thank you Alberto, you described CSR very well – it’s all of the above. Simple but complex at the same time.

To quote Alberto and change it just a little: “This is where the future lies: A unified return to CSR. Not CSR only in terms of philanthropy or compliance only but a sense of CSR related to value, opportunities and risk management.”

In conclusion, what is described as CSV and Corporate Sustainability are not new but captures some of the latest developments of how we practice CSR. And they do an excellent job of expanding the thinking of how we (should) practice CSR. But there is a limit to their contribution. Let’s not get distracted by shiny objects and new names – let’s stop this arguing about what we call it as it doesn’t help us do the work we are doing and distract us with discussions about terminology. The value of Porter and Kramer, and Andreau, gets lost in the discussion of terminology. We argue about what we should call it instead of expanding the discipline and practice of CSR. The value of Porter and Kramer lies not in calling it CSV but in strengthening the practice of CSR – shared value, co-responsibility, mutual responsibility etc. I think their description of mutual responsibility is a much better description of my own – shared value describes it better than my idea of mutual or co-responsibility.

By focusing on what we call it we lose the value of Porter and Kramer’s work when they describe the roots of shared value – taking on Friedman, showing how shared value is a traditional part of the best companies, show how reconceiving products and markets can bring new value to business and society, highlight local cluster development as a driver to create shared value, and so much more. None of this is new – Starbucks have been sourcing this way for over 10 years; cluster development is a natural phenomenon and the modern version was started by a history prof and a garage owner in Chihuahua, Mexico; most companies started with a shared value offer – from Walmart bringing cheap food to the poorest Americans as close to their homes as possible to the mom-and-pop shops offering locally produced good. The beauty does not lie in the fact that they create the concept of CSV but rather in their ability bring the latest thinking and practices of CSR into one single place – and drive us further forward in the implementation and practice of CSR. It is a powerful piece and one that should be used to defend CSR and show how CSR has grown instead of using it to divide us even more because of a debate on terminology. Let’s stop arguing what we call it and focus on what we practice and do each and every single day. Let’s advance the discipline of CSR instead of creating more divisions through renaming it. Let’s focus on improving the impact of business on society and identify mutually beneficial opportunities instead of looking at the impact of what we call it. Let’s just do it instead of calling it…

CSR is dead! Long live CSR!

(Disclosure: As promised, I think it is only ethical and right for me to mention when I have worked or work with a company I mention in my post. It’s called transparency. All of the companies mentioned above – Starbucks, Levi’s and Best Buy are clients.)

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It is election time here in the USA. To state the obvious – It’s an interesting time to be in the US. It’s even more interesting to watch how business behave during these election cycles. This election is especially interesting from that perspective as the two main parties are very divided on a range of social and economic issues. The emergence of the Tea Party and the right-wing in America begs the question – how do business lean during this election? And what does it tell us about their values?

For me this election raises the question of whether business have managed to really live their values through the political support they give to any specific party. The Republican Party is pitched by most as the business friendly party. The one that will look after the interest of business more than the Democratic Party. Of course this judgement is based on the value that the Republican Party will provide business compared to what the Democratic Party has to offer. Lower taxes, less regulations etc are all seen as Republican Party strengths – and all aimed at the value bottom line of business.

 But what about the values bottom line of business? How does their support of one specific party reflect on the values they claim to stand for? A few examples makes me question whether business takes their values as seriously when it comes to politics as their value bottom line.

Firstly, a number of companies are rightly proud of their ranking as good employers. And some of them are very proud that they are constantly ranked  by the Human Rights Campaign as Best Places to Work. The HRC lists the top businesses that support equality for lesbian, gay, bisexual and transgender employees. Now this is where I am slightly concerned that companies overlook these values when it comes to their political support. Do they take into consideration whether a specific political party of group (like the Tea Party) or a specific candidate support these values they uphold as important to their business? I dare say that not all of them do. Too many of the companies listed on the HRC Best Places to Work are also big supporters of candidates and political parties who do not believe in the equal rights for all their employees. I question whether employees are really the “greatest asset” of a company if that company is willing to sell the rights of their employees for a few dollars more to the bottom line.

Secondly, how about climate change? If your company believes that climate change is real and is a real threat to the long-term sustainability of your business – how can you justify supporting an individual or political group who do not believe that climate change is a threat that needs urgent attention?

This second point comes close to the value argument. The first point of equal rights for your employees is mostly a values argument but climate change is about both values and value. It affects your business sustainability and therefore the value you offer as a business. Maybe the world becomes grey because the business makes a decision between short-term value and long-term value. Tax breaks, subsidies, less regulations etc are all perceived as adding short-term value while climate change is something that will starting to hurt the business in 50 years or so. Like a frog being boiled…

I think that some of the support businesses give to Republican Party candidates and the party itself more out of legacy than anything else. They have always done so and will continue to do so out of habit. The truth is that both parties are pretty business friendly compared to most of the world. The value differences are more marginal than people would like us to believe. For example, businesses are cash flush at the moment, profits on Wall Street is up etc – all under Democrat rule. But like anyone who has a long-standing habit or addiction, businesses will support the Republican Party and candidates “because that’s what they’ve always done”. Not a compelling reason but still a reason.

For some businesses it is a clear-cut reason. If they believe that clean energy or a drive for more renewable and alternative energies will hurt their business they will fight against it. Guess who fights renewable energy more than the other when it comes to political parties? But what about that company who believes that the environment is key to who they are as a company? If you are in the outdoor industry then mountains mean a lot to you. People use your products to go and enjoy nature. So how would you feel if someone mines away that mountain top? Not so good. And how about being in an alliance with a company and/or party who supports mining that mountain top? Be careful who you form alliances with even when you don’t mean to be in a formal alliance. You are who you support and who your candidate supports. You can’t shout for greater action on climate change one day and then support a party or candidate who stands for the opposite. Stick with your values or stick with your value – if you believe they are separate. But please don’t claim to have CSR or sustainability in your DNA and then take actions which completely contradicts your statement.

There are many more of these examples. Companies in the construction industry – are you supporting the party who are providing cash to rebuild America or are you supporting those who say that they should never have spent this money in the first place? Retailers – are you supporting those who want to provide continuous tax breaks for the middle class or those who insist that the richest get the biggest cut or no one gets a cut?

Look in the mirror and ask yourself whether you are willing to trade your values in for a perceived value. History is littered with the easy way out – take the money and forget about the rest.

I don’t have a problem with that. Each company will decide what is best for them. Just do me a favor – don’t sell me CSR snake oil stories of “it’s in my DNA”. Embrace who you are and live it. Be true to yourself no matter what that truth might be.

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We can all breathe a sigh of relief – the recession is over! Oops… Actually the recession was over in June 2009 already. So let’s get this party started!

But for some reason the public party hasn’t stated yet. The recession is over but the pain remains for the Average Joe in the street. No jobs being created and a drop in the average wealth of Americans just to rub salt in the wounds. But it’s been bad for everyone, no doubt. And we all did our fair share of suffering during the recession – some more than others. More importantly, companies practiced their responsibility during the recession, right?

A few things have really bugged me during this recession – or whatever you want to call it. It comes down to a simple question of how would a responsible company act during a recession. I’m not convinced that all companies acted as responsible as they should have during these tough economic times.

Firstly, it’s been reported that corporate cash in America is at a record high. The Fed estimated $1.8 trillion in total corporate cash balances in both absolute numbers and as a percent of total corporate revenue. A nice pile of money. And of course there are rational thinking behind it. They have good reasons for keeping the cash. But having a rational reason doesn’t mean it is the right reason. I feel uncomfortable knowing that it was the public money that bailed out so many companies. And that it is public money going into the stimulus that targets businesses of all sizes to benefit. And that people expect the public to start spending to get the economy going again. People are paying for this recession through job losses and rising public debt. My question – what should a company that believes it has a responsibility towards the public do during these times? Should it keep record cash stashed away for when the economy picks up or should it use that money to also help stimulate the economy? It just feels as if all expectations are on the average Joe in the street and the government to lead the recovery while too many businesses sit and wait it out until the economy has recovered. Doesn’t make sense when they always promote the idea that they are the heart of the economy. Really? And when the blood doesn’t flow as fast as you like you decide to stop beating for a while?

I believe a responsible company would acknowledge that they are as much of the problem as all of us – and do as much as the rest of us when trying to dig ourselves out of it. They expect us to start spending to get this economy going. We expect them to start spending as well. You don’t want us to put all our money in the bank right now. You want us to buy new cars, build new houses, buy more clothes, speculate on the market – make the little we have work for the economy. Ditto… We want you to invest in new fleets, upgrade your facilities, keep your workers… Make your money work and make it work now. I’ll do it when you do it. Don’t ask the public to do something you aren’t willing to do yourself. Stop giving us reasons why you are holding the cash. You might have good reasoning but not as good as the reasons why you should make that cash work now. It’s always easier to say why you won’t do something than doing the right thing. And remember, the quicker we get out of this the better it will be for all of us.

Secondly, this thing about those jobs not being created… I am always amazed how companies consistently tell me that their employees are their greatest assets. Really? But you don’t hesitate to “downsize” when the bad times roll? If employees are really the greatest asset that a company might have – how about keeping those crown jewels during tough times? Of course I understand that companies will have to fire workers during really tough times. And we’ve had really tough times. But let’s put these tough times into a bit of perspective.

Of course it makes 100% sense to let workers go when a company is making a loss. Companies cannot exist when not making money. But here is the catch. Many companies didn’t let workers go because of the losses the companies were making but because of lower profits. Many of them weren’t making losses, they were just making lower profits than before. That’s a huge difference. Making a loss means that you might have to close your doors and one of the only ways to save the company is to let a few people go – cut costs. But what if you are still making a profit but just lower than expected? Do you cut your workforce or define a new strategy to you can keep your “greatest asset” and be ready for when the good times kick in?

Maybe you should devise a strategy where you retrain those workers, maybe cut some hours off some of their time, maybe cut the bonuses and pay increases for all workers (including senior staff), invest in strengthening relationships with key customers etc – show your innovative spirit you brag about by finding new ways to keep your workers and stay profitable during tough times. Instead of laying people off you invest in them to be better placed than your competitors when the economy turns for the better? Your workforce will be better, sharper and your relationships stronger. I know a company who did exactly this and guess what? They actually grew at a higher rate than their competitors during the tough times and moved from number 3 in their industry to number 1. I’m just damn glad I work for that company… It helps when you have visionary leadership, your “greatest assets” believe in you as much as you believe in them, and we all work extra hard to make all of us better. Simple strategy? Yes. But it takes leadership to know that.

Maybe that is what a responsible company should be doing during a “slow growth” period. Instead of taking the easy option and letting people go you invest in them and grow your market share. Show you believe in your “greatest asset” as much as what you want them to believe in you. Leadership is defined not by what you do during the good times but what you do during the bad times. Relationships, loyalty, responsibility etc are defined in the same way – by what you do during the bad times and not the good times. The good times are easy but the bad times needs leadership, vision and balls.

But it goes beyond pure leadership. I think trade unions and employees were soft during these the recession as well. Too often they allowed the business side to frame the debate. They allowed business to panic and let workers go without a thoughtful strategy. Also, some companies used the opportunity to streamline their workforce that might not have been possible during other times. Cut human resources costs during the bad times always makes more sense from a risk and reputation perspective than doing it during the good times. Actually, it still comes back to leadership – what it takes to gear a company for the long-term and build a true culture of “great assets”.

You might not be able to create new jobs but you can show your responsibility as a company by not letting workers go during “slow growth” periods. It’s bad for all of us – every business suffered. But keeping your greatest assets intact and polishing them a bit will put you ahead of your competitors when the time comes. And now? Now you will be playing catch-up.

As a third point – the investor excuse. Of course many companies cut their workforce because investors demanded it. Those darn investors… They always want their 20% return each year. Actually, the 20% per year types aren’t really the problem. It’s those 1% week guys that are the problem – they want their money to go in-and-out and have no commitment to any specific business in the long run. So companies are under short-term pressure to show constant growth in returns. And if you can’t do it with growth then you do it by cutting costs. Talk about cutting off your nose…

Investor responsibility has been at the sidelines of CSR for far too long. We just can’t seem to get a grip on them. Maybe it is because we don’t know how to “sell” responsibility to them. Or maybe it is because many of them just don’t care. That’s for another day as Enron, BP etc have made a solid case on why CSR is important for investors… Here is a note for companies – how about you focusing on those who actually do care about you? We do. Us consumers and those workers of yours. We want you to succeed. Investors? The speculators amongst them don’t care about you one dime. What they do care about is the return they get from you in the next week or month. If they see someone better looking? They move on. They act like a 16-year-old who promises you the world as long as they can get what they want – untill they find the next hot one and move on. I’m 40-ish. I’ll stick with you if you promise to stick with me…

Last point on a responsible recession – patriotism. I was in a meeting a few weeks back with some of the best minds around. All of them geared towards helping a great company break through the clutter – they do so much that they create white noise instead of a clear position when it comes to CSR. Anyway, all these values were written on the board that reflected what the company stood for. And then someone said the “A” word – America… They argued that the company should show more pride in them being an American company with American values. Of course my first reaction was … WTF? I did point out that those values written on the board were no different from the corporate values practiced in my country of birth South Africa or the UK – or Europe. Or Japan. Or… The point was that most values are shared by various different cultures and that the differences are marginal not matter how much we like to tell ourselves something different.

But it did make me think about patriotism. The reason why the idea of American values were raised in the meeting was because the people in the room were pretty patriotic – and rightly so, be proud of who you are and where you come from even when you are more or less the same when compared to others. But what does corporate patriotism mean during a recession? Patriotism isn’t something CSR takes seriously but it is something we should look into when a company claims certain values and make claims of patriotism through advertising, lobbying etc. So the question was – what would a patriotic and responsible company do during a recession? Will they fire their fellow Americans? If yes, what does that tell you about their patriotism? Are they “fair weather” patriots who will say the right thing to get attention but then not back it up by action?

If you claim patriotism in some form then your actions should reflect that. Not only should you not downsize when you aren’t making a loss but you should go out of your way to help rebuild your country with the record cash you have in hand. Isn’t that what a responsible patriot will do? Use their resources to help their fellow Americans? Or does patriotism stop at getting people to buy a product made by an American company? Of course “made in” is a completely different story – and so are taxes. But that we’ll leave for another day.

Do I think companies acted responsibly during the recession? Some did and some didn’t. Those who let workers go when they weren’t making a loss lost their right to make the “greatest asset” claim. Don’t expect the same level of loyalty and commitment because you didn’t show it. Those who kept their cash when it could be used more effectively to rebuild the economy weren’t responsible citizens because they expected their fellow citizens to pick up most of the slack. Those who did everything to keep speculators, I mean short-term investors, happy weren’t looking at their long-term responsibility to their own company. Those who beat the drum to get consumer to buy their American products but didn’t put their own money into the game weren’t very patriotic or responsible.

The recession showed, and continues to show, us those companies who truly practice responsibility to themselves and society. Some were caught out while others shared the burden with the rest of us. The recession was good for CSR because it helped us define success of CSR in the toughest of conditions. Some failed and some helped us build a more responsible and profitable corporate world. At the very least the recession showed us the true CSR colors of companies. A good spin or substance…

So tell me – Were you a responsible corporate citizen during the recession? Really?

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Partnership anyone?

 

The oil spill seems to have more than just an environmental and political impact. It’s starting to impact how partnerships are formed between companies and NGOs. Some environmental NGOs are being tarnished – thanks to their relationship with BP. The Washington Post wrote an article about how the Nature Conservancy (and Conservation International and EDF) is facing a potential backlash because of their ties to BP. It has sparked a lively debate amongst Nature Conservancy members as the Nature Conservancy defended it’s position in a piece called “Why We Engage With the Energy Industry: It’s For Nature“. I’m less interested whether environmental NGOs should partner with energy companies as that is for each one to decide according to their principles and what they are trying to achieve in their own unique way. What I am interested in are the lessons we can take from the controversy – for NGOs and companies. 

Of course NGOs will have to be more discriminating when it comes to their partnerships. Or maybe a bit more transparent and proactive with their members on how they partner and who they partner with. The complaints from the Nature Conservancy members are legitimate but it is mostly because they just did not know about the Nature Conservancy and BP relationship. They based their support for the Nature Conservancy on what they thought the Nature Conservancy should do when it comes to partnering and not what the Nature Conservancy actually does. We live in an increasingly transparent world where no information is hidden anymore. That’s not to say that the Nature Conservancy (or any of the other NGOs) hid what they did. It was just not seen as a priority communication to members. Their argument will be that the information has always been there for anyone looking – or asking. 

However, the information overload in the world we live in also means that people can’t research all the facts – there are just too much information. What we’ve seen more and more is that people rely on their friends, blogs and other social media to get their information. They trust these sources – why would my friend lie? The problem is that none of these new sources of trusted information tend to have all the facts. Your friend tells you that the Nature Conservancy is cool because they have always supported them or they’ve read something that they liked etc. But the detail tend to be missing. The sources people trust do not always have all the details – just soundbites. It works most of the time as most things tend not to be such a huge issue. Until a major oil spill hits you… 

NGOs need to be more transparent on who they partner with, how they partner and why they partners. More importantly, they need to get to those places where people find their information – friends, blogs and social networks. It’s not enough to have a Facebook page or a nice blog telling people what you think and why they should support you. You should use these tools to engage not only new and potential members but also your existing members. Engage them and inform them of those areas you (and them) would see as potential risk areas – your corporate partnerships… Be open and transparent about who you are, what you do and who you work with. We ask companies to be transparent and proactive about these issues – and so should those who defend the rights of civil society and the environment. Go out and engage in a transparent and open way. The more people know the more likely you will have members who know what they are getting into and the more loyal they will be. It’s like any relationship – you want to know everything before making a commitment. Don’t be like so many who marry based on a gut feeling instead of digging deeper to see if you will really stick together in “sickness and in health.” 

People also make assumptions based on names. The Nature Conservancy. It’s about conserving nature, right? And the elevator speech tells me that. Most people don’t read further than that because the name and soundbites gave them what they think they were looking for. However, the devil is in the details – the fine print. Encourage supporters to be diligent in doing their research before the time. Give them a “Term & Conditions” document to “agree to” before they can become a member. Spell out what you do and who you do it with. The same way we want companies to tell us who they partner with. Don’t assume people will know what you do – they don’t. 

Don’t try to be everything for everyone. There are so many causes nowadays – I’ve written about this here. Competition amongst NGOs are growing as each one tries to carve out a bigger part of the “market share”. The number of NGOs are exploding because each individual is trying to match their “unique” view with a charity to match. It becomes increasingly difficult for large NGOs to attract new members. One way they try to address this is by becoming everything. You care about turtles? We’ve got just the right program for you. Oh, you like trees a bit more? Step right this way for your own huggable tree. 

You can’t be everything. Pick what you want to address and be the best at that. Less of a Jock of all trades – more a master of one. This way you know what you are and, more importantly, your members know exactly what you are and it’s easier for them to see what you do and how you do it – and who you do it with. Starbucks sells coffee not cars. Microsoft doesn’t sell houses. Timberland doesn’t drill for oil. They know who they are and what they are good at. I don’t have to guess what they do when I go and buy my coffee, software or boots. Furthermore, knowing who they are and what they offer makes it so much easier for me to dig around to see how they do what they do – the CSR and sustainability bits. And, of course, who they partner with. 

Lastly, some NGOs like Oxfam GB, WWF and Greenpeace have very strict rules that govern their behaviour and partnerships. I’ve worked for Oxfam GB and they don’t rule out partnerships with companies but have very strict guidelines. For example, they will not accept any funding from companies remotely linked to any issue or campaign they work on. It hasn’t always been a popular position but it made it easy and very clear on how you manage relationships and expectation – and engagement with supporters and companies. Oxfam GB can work with a company to help them on the ground as long as it helps them achieve their primary goals – addressing poverty – but no money can be exchanged. NGOs should be clear on this – when do or don’t you accept corporate cash or goods. I’m not saying that those being targeted because of the oil spill and their partnership with BP don’t, but it is clear from the concerns by members that the members did not know the rules. During my days at Oxfam we used to make that a key part of all communications – large public meetings with supporters or closed meetings with companies. Everyone knew the rules and had to live by those rules. Make it, know it and talk about it. 

Last point on how the oil spill could be redefining partnership… This time on the corporate side. 

Companies should also become more discriminating about their partnerships. The partner of your partner now becomes your partner. True progressive companies, or at least those who claim CSR and sustainability leadership, will have to become more careful who they pick as their NGO partner. Do you really want to partner with an organization that might be perceived as “sleeping with the enemy” because of other relationships they have? Their reputation is your reputation. It works beautifully when they can help tell your story but it can come back to haunt you if they become tainted. Pick your NGO partner carefully – using the same rules I mentioned above for NGOs. 

But progressive partnerships go further than your partnerships with NGOs. Who are you partnering with on the corporate side? It is becoming increasingly unacceptable to have a “lager” mentality where you can keep quiet about what other businesses are doing. Not every business out there is your friend just because they are a business. Think about it this way… 

Say you are dependent on milk from a very specific area for that unique cheese you have to offer. And then they find oil there. This could mean the end of your business or at least your competitive edge. Do you keep quiet or do you tackle the business that threatens your business? 

Let’s try another example… 

Let’s say that as a company you stand for the environment. Your brand is something that stands out in its advocacy for the environment. You might even be in the line of making clothes or boots for outdoor use. You champion this and you build your brand on your environmental credentials and progressive advocacy. What do you do when a mining company mines off the top of a mountain? Do you keep quiet because it is another business or do you speak out because it threatens your business or at least devalues your brand. 

The same goes for Climate Change. Why keep quiet if you truly believe that it can have a material impact on your business? Should you not defend your business interests and long-term survival? Should you not tackle those who threaten your business or who advocates against your interest? Why even closely associate yourself with businesses whose practices threatens your business? Just because they are a business? We don’t even do that as humans… 

Your partnerships and allies will be a key way to communicate what you stand for. Traditional business associations are becoming more irrelevant by the day – new broader stakeholder partnerships based on shared values are increasing. Why? Because people see who you are through the relationships that you have. Associate with businesses that are against what they believe in will make them question you. And threaten your business. The question for you – what does this mean for your business and how can you stay ahead of the pack? Redefine your partnerships with NGOs and other businesses. Find the right match and build on that. 

Partnerships are being redefined and you will either fall behind or you can be part of defining the new way of partnering. You decide.

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