Sustainablog

This blog will cover some news items related to Sustainability: Corporate Social Responsibility, Stewardship, Environmental management, etc.

9.2.05

Several responses to the Economist survey on CSR

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Self-interest in a globalising world: A response to the Economist
EC Newsdesk
6 Feb 05
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David Chandler offers a personal response to recent attacks on the notion
of corporate social responsibility
In its issue of January 22, 2005, The Economist, in a special survey on
corporate social responsibility (CSR), criticises the growing support for
more socially responsible business as ?based on a faulty?and dangerously
faulty?analysis of the capitalist system.?

?Advocates of CSR,? the magazine argues, ?work from the premise that
unadorned capitalism fails to serve the public interest,? while resenting
the pursuit of profit as a ?regrettable necessity.?

The Economist rejects CSR as a distraction to the fundamental business of
business?making a profit, guided only by the legal and ethical constraints
of the day.

Managers, they argue, are only the proxies of the organisation?s owners
and are not free to act irresponsibly with (read ?donate?) money that does
not belong to them.

In the place of CSR, The Economist advocates an Adam Smith-driven economic
argument that we all benefit when individuals or organisations act in
their own self-interest, ?unadorned.?

This, in itself, if a bit blunt, is fine.

It ignores the moral argument for greater corporate social responsibility,
for which there is growing support among owners, employees and consumers,
but it is a solid foundation from which to argue their position . . .
except that, by crafting a narrow argument, the magazine presents a
?you?re either with us or against us? choice that misses an important and
more subtle element of the debate.

Advocates of CSR are not against the notion of ?profit;? they also are
well aware of the social progress brought about by economic success.

Importantly, they are also aware of the damage that can be done when
individuals and organisations make the wrong choices?driven often by
self-interest.

It is the consequences of these self-interest decisions that,
collectively, impact the wider public interest. What has been lost in The
Economist?s analysis is what exactly constitutes an organisation?s
?self-interest? in a world that has been transformed by globalisation.

This world, in constant evolution, is where the grey areas of life, work
and society invade, and proponents of CSR engage.

Assuming Adam Smith?s pursuit of self-interest maximises benefit?both
economic and social?how should companies define what constitutes their
self-interest in a globalising, networked and increasingly affluent
business environment today?

For example, is it in an organisation?s self-interest to pollute its local
environment, or does it benefit from helping promote a healthy,
pollution-free society?

Is it in an organisation?s self-interest to pay its employees the lowest
wage it can get away with, or does it benefit from paying a wage that
builds a loyal, energetic, and productive workforce?

Is it in an organisation?s self-interest to hide its accounts and
transactions from the outside world, or does it benefit from promoting
transparent and accountable operations that encourage an open and honest
dialog with external observers and investors?

The list goes on and on, enters all aspects of a business? operations, and
is where proponents of CSR fight their daily battles.

In short, does the organisation benefit by adopting a short-term
perspective in implementing strategy and operations (a perspective that is
encouraged with an overly enthusiastic focus on the primacy of
shareholders), or is it better served by looking to remain viable over the
long-term, with the active support and encouragement of all its
stakeholders?

The Economist skims the surface of this debate in its discussion of its
four varieties of CSR and, in particular, its identification of ?win-win
CSR? as an ideal. However, to then label this quadrant as ?good
management? (rather than ?exceptional management,? for example) is to
imply that this is the default business outcome.

Few advocates of CSR would contend the ideal nature of business practices
that raise both profits and social welfare?in fact it is the core of what
many believe.

To argue that this outcome is anything other than the exception in today?s
business environment, however, belies the evidence that fills the virtual
pages of Ethical Corporation from issue to issue.

It is because ?win-win CSR? is so difficult to define and implement in
today?s convoluted business environment, even for those managers convinced
of the benefits, that the CSR debate as risen to the heady heights of
Davos from the sidelines.

Yes, an organisation needs to pursue its self-interest in order to
maximise economic and social benefit for all. But, today, that
?self-interest? is increasingly being defined as one in which a long-term,
broad perspective of business needs to be adopted.

The way to maximise shareholder interests, and sustain returns, is by
striving to meet the needs and address the concerns of as many
stakeholders of the organisation as possible.

How this debate plays out on an industry-by-industry basis and in terms of
a business? day-to-day operations is still very much up-for-grabs.

These are the grey areas where the CSR debate rages today. It is a debate
in which The Economist would serve its readers best by participating
rather than harping from the sidelines.


David Chandler is the co-author of "Strategic Corporate Social
Responsibility", due out later this year from Sage publishing.

==========================

The good company
SIR ? Your survey of corporate social responsibility (January 22nd) argues
that governments should be accountable only to their electorates and
managers only to their shareholders. However, governments have become
frequently accountable to certain parts of their electorates more than
others. Consequently, a large and well-organised set of consumers does not
see its priorities reflected in the policy actions of its governments.
These global citizen-consumers have come to believe that they can exert
influence over public policy more effectively through consumer activism.
When large numbers of consumers come to believe this and act accordingly,
managers practise ?good management?? not ?delusional CSR?.
Raymond Levitt
Stanford, California
SIR ? Your arid leader (?The good company?, January 22nd) seeks to
discredit CSR by creating a false antithesis. Most advocates of CSR
accept, as I do, that unadorned capitalism can serve the public interest ?
and adorned capitalism, through companies with an appropriate and
proportionate approach to CSR, can serve that interest even better. The
impact on reputation, on recruitment and on potential investors is
considerable. You are right to remind us that corporate giving is
philanthropy at shareholders' expense and that concentration on
shareholders' interests is the first responsibility of management. It is,
however, wrong to suggest that the two are irreconcilable. I firmly
believe that the best companies, in Adam Smith's terms, can also be ?good?
and that your pejorative use of that adjective is misguided.
Sir Christopher Bland
Chairman, BT Group
London
SIR ? The idea that unregulated capitalism automatically generates social
benefit is nonsense. Irresponsible companies cause damage by pursuing
profit at the expense of everything else. Such companies do not simply
ignore the social implications of their actions; they knowingly pursue
strategies that will be harmful. However, not all NGOs are
anti-capitalist. We simply demand that businesses ensure their operations
do no harm to vulnerable people or environments and operate to high
standards wherever they work, whether in pharmaceuticals, mining,
sweatshops or commodity supply chains.
Jeremy Hobbs
Oxfam International
Oxford, Oxfordshire
SIR ? The very first food aid to arrive in tsunami-stricken Banda Aceh
from the World Food Programme was trucked in by a corporate donor. TNT
provided aircraft, delivery vans and drivers. Unilever lent its vast
distribution network to get food to survivors. Danone manufactured and
donated high-energy biscuits. Citigroup immediately offered office space,
desks and phones for the team of WFP logisticians. And Boston Consulting
Group employees lent their expertise. In the immediate aftermath of a
disaster, this kind of help is better than any money can buy.
James Morris
UN World Food Programme
Rome
SIR ? A well-run company engaging in the selfish pursuit of profit would
lobby for subsidies and tariffs to reduce costs and increase revenue,
heedless of the market distortions they may cause. How do you square this
with your usual argument that free trade is necessary to lift developing
countries out of poverty?
Jean-Philippe Marcotte
San Francisco
SIR ? Like the academics and consultants that have mushroomed under CSR,
you concentrate on a woolly debate and wholly ignore the challenge that
capitalism faces today. There is a prevailing public distrust of companies
arising from the perception that profit precedes principle, rather than
being based upon it. Nothing could better illustrate the validity of this
perception than the recent 20th anniversary of the Bhopal disaster ? one
of the worst examples of compromised safety and adequate compensation
being denied in the interest of corporate profit. Capitalism, the most
effective mechanism the world has so far known for providing goods and
services and creating wealth, is under threat not from without, but from
itself and from its lack of underlying principles. It is a threat probably
increased by the confusion of thought fostered by the proponents of CSR
and the tunnel vision of its opponents, whose views dominated your survey.

Sir Geoffrey Chandler
Former Director,
Shell International
Dorking, Surrey
SIR ? Governments fail to pass adequate laws to protect the environment,
contribute miserly sums to relieve tragedies and tolerate or exacerbate
the existence of extreme poverty. The fact that some corporations have
chosen to devote assets to their social responsibilities is far less
troubling than the fact that some governments have not.
Pat Meier
Blanchardville, Wisconsin
SIR ? As companies have gone global, issues once considered ?soft? by the
private sector now pose ?hard? business dilemmas and are becoming part and
parcel of corporate risk analysis. So long as governments fail to do their
part and so long as business goes global, CSR helps fill an important
void.
Georg Kell
UN Global Compact
New York
SIR ? There you go, comparing Adam Smith's butcher, brewer and baker with
multinational conglomerates. This is ridiculous. Then as now,
neighbourhood butchers do not command multi-million dollar advertising
campaigns, experts to move pre-tax profits to no-tax havens, and the clout
to lobby politicians on national, or even local, issues. Neither Smith's,
nor today's, butcher can get huge tax breaks and heavy subsidies on top.
Nor do they command annual budgets that exceed the GDP of small countries.
Martina Hütter
Hamburg, Germany
SIR ? At the heart of the issue lies pressure from those NGOs to whom
modern capitalism and profitmaking are anathema. They have been remarkably
successful at gaining the moral high ground (they are even dubbed a ?civil
society?) and in nurturing a distrust of business. This in turn has led
business to distrust itself, producing a climate in which companies rush
to embrace all aspects of the CSR agenda. The challenge now is to generate
a new climate where business considers what the right elements to pursue
under the heading of ?good management? are. If that cannot be achieved,
more regulation will inevitably move the equation inexorably from good
management, within the control of business, to pernicious and delusional
CSR.
Patricia Peter
Institute of Directors
London
SIR ? As a consumer and a citizen I must say that neither hamburger chains
sponsoring youth football teams nor the occasional recycled envelope
impresses me much. Companies should drop this fashionable farce. Or at
least call CSR by its true name: marketing.
Ingvild Paulsen
Glasgow
SIR ? It seems to me that Charles Dickens taught us (and Ebenezer Scrooge)
a fundamental lesson: mankind is our business.
Paul Battaglia
Herndon, Virginia

8.2.05

Hotting up: the debate over global warming is getting rancorous

Hotting up
Feb 3rd 2005
From The Economist print edition




Getty Images





The debate over global warming is getting rancorous
?THE intermixing of science and politics is a bad combination, with a bad
history.? So warns Michael Crichton at the end of his current, popular
novel, ?State of Fear?. He argues that wilful obfuscation by politicians
and wild-eyed greens is leading to a herd mentality over global warming,
akin to the uncritical embrace of eugenics a century ago. ?Once again,? he
intones ominously, ?critics are few and harshly dealt with.?
At first blush, it appears that Dr Crichton might have a point. Of course,
there was once an intense global debate over global warming's most sacred
cow?the Kyoto protocol on climate change. The treaty calls for immediate
reductions in emissions of greenhouse gases by industrialised countries.
George Bush upset many greens by abruptly confirming in 2001 that America
would never ratify the Kyoto treaty. But other countries did ratify it,
and it is due to come into full force for them on February 16th, so the
Kyoto debate is over.
The concern about crusading politicians also seems relevant. Tony Blair,
Britain's prime minister, says climate change is his top priority, along
with Africa, this year. He asked Sir David King, his chief science
adviser, to organise a scientific conference in Britain this week to work
out what adds up to ?dangerous interference? with the climate system. The
conference had not ended as The Economist went to press, but there was
talk of pressure from politicians for agreement on a specific numerical
definition of what is ?dangerous??a notion some participants said was not
justified by the science.

They said, they said
Despite Kyoto's coming into force, vigorous debate between and among
climate sceptics and climate hawks continues. First, consider the ongoing
haggling over the science. The Intergovernmental Panel on Climate Change
(IPCC), a body of leading scientists which advises the UN on climate
issues, has established that the Earth is indeed warming, thanks in part
to man's burning of fossil fuels. However, questions still remain as to
the particulars.
For example, when Kevin Trenberth, head of the IPCC's panel on hurricanes,
recently suggested that there exists a link between climate change and the
wave of powerful hurricanes last year, he was immediately challenged.
Christopher Landsea, a hurricane expert at America's National Oceanic and
Atmospheric Administration, resigned from the IPCC panel, arguing that Dr
Trenberth's comments went beyond what the peer-reviewed science could
justify. He wrote a public letter complaining that: ?because of Dr
Trenberth's pronouncements, the IPCC process has been subverted and
compromised, its neutrality lost.?
Dr Trenberth retorts that ?politics is very strong in what is going on,
but it is all coming from Landsea and colleagues. He is linked to the
sceptics.? He explains the remarks in question by saying that he did not
suggest climate change was affecting the number of hurricanes, but was
affecting their intensity, because of hotter ocean temperatures, a
conclusion he says the data readily bears out.
Another example is the controversy over the most important totem of global
warming: the ?hockey stick?. That is the nickname given to the plot of
global temperatures published by Michael Mann, then of the University of
Massachusetts in Amherst, and his colleagues in 1998, which shows a sharp
upturn beginning at the time of the industrial revolution. This chart has
often been trotted out as the clinching proof of anthropogenic warming.
Sceptics have never liked this chart, which necessarily relies on
statistics to infer historical temperatures from tree rings.
Two critics, Stephen McIntyre of the Northwest Exploration Company, in
Toronto, and Ross McKitrick of the University of Guelph, also in Ontario,
are about to publish a paper in Geophysical Research Letters (GRL), which
alleges that Dr Mann's statistics are inaccurate, and that the hockey
stick is a mere statistical artefact. Dr Mann and many other climate
scientists dismiss Mr McIntrye's and Dr McKitrick's arguments.
The statistical issues involved are complicated?even Stephen Mackwell, the
editor-in-chief of GRL, which also published some of Dr Mann's earlier
papers (along with Nature), admits that he does not understand the details
of the new paper.
The debate over the economics of warming is, if such a thing were
possible, even more robust than the one over the science. The IPCC has
come under attack for its scenarios of future growth. One chief sin is the
reliance by IPCC modellers on market-based exchange rates instead of
purchasing-power parity, which adjust wealth according to domestic
purchasing power?which many economists believe is more accurate. That,
says David Henderson, an economist at London's Westminster Business
School, leads to unrealistic projections for economic growth and therefore
emissions growth. He and Ian Castles provided the IPCC with detailed
critiques.
Did the IPCC welcome the chance to improve its projections? Initially, it
most certainly did not. Dr Henderson was frustrated by that reaction.
However, he was encouraged to learn this week that serious economists were
cloistered away at a recent meeting studying ways of incorporating his
critiques into the IPCC modelling process. Whether any substantive changes
will emerge remains unclear, but a proper re-think may be in the works.
Disagreements are also breaking out among those economists relatively
sceptical about the effects of climate change. The Copenhagen Consensus, a
project led by Bjorn Lomborg, a professor at the University of Aarhus, in
Denmark, and publicised by this newspaper, made something of a splash a
few months ago by ranking climate change at the bottom of a list of
pressing global problems (see articles). A panel of eminent economists,
among them three Nobel prize-winners, placed initiatives to tackle
HIV/AIDS, malaria, sanitation and other problems confronting the world's
poor ahead of proposals to tackle global warming, which were described as
?bad? investments compared with those aimed at tackling these other
problems. But several participants now say that there was confusion about
how they were ranking ways to spend development aid, or ranking which
general global problems should be tackled.
Of course, greens howled in protest at the dismissal of climate change,
and pointed to some sort of stitch up: after all, some argued, Dr Lomborg
is well known for his opposition to the Kyoto treaty. He rejects such
claims, insisting that the effort was in good faith. He points out that
the man selected to write the ?expert paper? on climate, William Cline of
the Centre for Global Development, a think-tank based in Washington, DC,
has impeccable credentials; indeed, he is known as an advocate of
forceful, early action to slow global warming. Dr Lomborg explains that
the proposals on climate change fared poorly because they offered the
lowest benefits for the costs incurred.
Now, some members of the Consensus are dissenting. Thomas Schelling of the
University of Maryland, who voted on the final choices, thinks that
presenting climate change at the bottom of the list as ?bad? is
misleading. He says he and the other gurus did not like Kyoto or the
aggressive proposals made by Dr Cline, whom he sees as the ?most alarmist
of the serious climate policy experts?, but Dr Schelling says he would
have ranked modest climate proposals higher on the list, because he sees
climate as a real problem. Robert Mendelsohn, a conservative Yale
economist who was an official ?critic? of the climate paper in this
process, goes further: because Dr Cline's positions are ?well out of the
mainstream?, he had no choice but to reject them. He worries that ?climate
change was set up to fail.?
Dr Lomborg insists that that was not at all the case. Picking an
enthusiast like Dr Cline also could suggest that climate was being taken
seriously by the Copenhagen process. However, he accepts that more modest
proposals (such as a small carbon tax or investments in research) would
have ranked higher on the list. Dr Cline, for his part, acknowledges that
his views (for example, on the right discount rates to use when pondering
long-term policies) ?have not yet been accepted by the mainstream.? He is
unhappy with how climate has been portrayed by the Copenhagen process, but
he still feels that the attempt to assess global problems was well
intentioned and worthwhile.

The death of environmentalism?
Perhaps the clearest sign that the imminent arrival into force of Kyoto
has not led to a bout of green triumphalism comes from the debate among
America's greens today. Michael Shellenberger and Ted Nordhaus, political
strategists and green organisers, argue in a recent policy paper that,
judging from polling data, America's big environmental groups have failed
to persuade most Americans. They argue that greens need to develop more
convincing arguments to get Americans to take global warming more
seriously.
Predictably, Messrs Shellenberger and Nordhaus have unleashed a stream of
counter-attacks that have led to a lively debate among American
environmentalists. They conclude: ?We in the environmental community today
find ourselves head-down and knee-deep in the global warming river. It's
time we got back to shore and envisioned a new path for the crossing.?
Despite the arrival of Kyoto, the debate and dissent of recent weeks
suggests that the treaty has not produced the world of self-confident
greens and smothered critics feared by Dr Crichton. In fact, the contrary
seems to be true.