CSR Education

Net Impact, a national organization for (mainly) MBA students interested in corporate social responsibility, today released detailed profiles and rankings of the "best" programs for those interested in the CSR field, based on over a thousand member surveys.

This is the first such publication, and it's still a little rough around the edges - but very transparent about its weaknesses. Overall though, it's very exciting to see this come out. I've struggled myself to figure out which programs are strong in this area.

See the profiles and rankings in .pdf format here.

"This week in CSR" (08/19/06 - 08/25/06)

Soon I'll be re-starting my part time work for the Center for Corporate Citizenship at Boston College (after a wonderful summer off!), and this means I'll be combing through even more CSR news every week. One post a day won't cover it; and several paragraphs per post would be too much for my schedule.

Therefore, I'm going to try a new format for Friday postings: "This week in CSR." It will be a few bullets on the stories you shouldn't have missed if you have a serious interest in this field, plus some interesting but less-essential tidbits.

This first edition won't be comprehensive, but I might as well start with something…

• AOL has several controversies - one is an Internet sensation of a recorded telephone call that reveals what many of us already knew: that it is next to impossible to cancel your account; the other is the un-vetted release of anonymous but individually-coded search data to an academic portal, which was widely copied and saved before AOL removed it; the data show interesting patterns such as who was searching for personal information online and who was looking up "how to kill my wife."
• Wal-mart has allowed its China stores to have unions (or rather, to have employees join China's one and only state-recognized "union"), and more recently has allowed employees to form Community Party committees at its stores.
• Pepsi has been banned (along with Coke) in several Indian states for allegedly allowing pesticide residues in its drinks; ironically, it has also named an Indian woman to its top post - a move that might have seemed too coincidental if not for longstanding predictions that she would eventually take over the helm. In another Pepsi/Coke saga, three senior Coke executives tried to sell secrets to Pepsi, but the company took the high road (or perhaps the good-publicity road?) by making the incident known to Coke and to the public.

Got any news that I should include? For inclusion in future Friday briefs, send me an email (mtritter at gmail dot com) to notify me of some story you think the CSR world should know about. Thanks!

Tradable pollution permits

As a follow-on to yesterday's post, which ended with the idea that harnessing market economics can be useful for social and environmental aims, I wanted to briefly note that I have a long-standing interest in "tradable pollution permits" - in fact, I wrote my undergraduate economics thesis on the topic.

While the idea of "buying and selling pollution" strikes many people as inherently unethical, there are many advantages to this kind of regulation. For one, it sets a cap on total pollution - which is often the overarching goal - rather than trying to reach a goal indirectly by limiting individual contributors to the problem. Second, it allows the abatement to happen wherever it is cheapest (and therefore more efficient), because those who can reduce pollution easily will reduce more than they have to and sell their permits to others (while those who find it very difficult will have to pay for extra permits from others). Third, this effectively punishes every instance of pollution, because each one incurs a very tangible cost. Fourth, it can often make a set of regulations viable in a situation where stricter "command-and-control" tactics would create a powerful backlash of lobbying and resistance.

But permit systems work well only under certain conditions. One is that the pollution must be "global" in the sense that one person's reduction is interchangable with another's. For example, SO2 contributing to acid rain is global, while littering is site-specific - so if I pay someone else to reduce littering in another town, and continue to litter in my own, then my fellow townspeople won't find this an acceptable arrangement. Also, it helps immensely to have a limited number of easily-identifiable and easily-regulated source points. For example, US acid rain mainly comes from S02, which mainly comes from 200-300 power plants - all of which are accustomed to regulatory oversight. Curbing global warming, on the other hand, is made more complex by distributed source points (automobiles) and a lack of cohesive regulation (many sovereign nations).

*********************************************************************************

After writing and posting this entry, I came across a great article from the New York Times that addresses exactly this issue ("Capital Pollution Solution," by Jeff Goodell, NYT 7/30/06).

Embryos, cadavers, and market economics

In the controversial world of biotech, a new method of harvesting stem cells may make all the difference. As published in the recent issue of Nature, scientists have developed a way to remove individual stem cells from human embryos without, apparently, harming the embryos themselves. Many are speculating that by satisfying ethical concerns, this new method may allow government funding of stem-cell research.

This issue reminds me of several research projects going on at Harvard Business School (where I work when I'm not blogging) on the "market" for such things as embryos and organs. Examples would be the Body Worlds exhibition, organ donation programs, and infertility treatments involving donated oocytes. Of course, these are not really "markets" in many senses of the word - selling is prohibited and the use of economic vocabulary seems crass.

But, in a general sense, there really is both a supply and a demand for these things - and a pricing point. By refusing to allow them to be priced, we end up with more demand than supply, meaning that many people are left without the kidney they need or the ability to become pregnant. Another side-effect of our refusal to recognize these as "markets" is their tendency to go underground - note the accusations that some of the Body World cadavers seem to have come from Chinese prisons.

I'm not advocating that we should explicitly marketize the supply of organs, cadavers and babies - far from it! If tried this, we'd need to create new regulations and think through them very carefully - and we might well fail and make a mess of things. What I'm doing here is simply commenting on a general phenomenon that I find very interesting: how economic forces will creep around many of our regulations, revealing our stubborn denial of economics.

At times, perhaps, it may be more socially useful to recognize that market forces exist, and then find ways to harness economics (rather than defy it) to reach socially-desirable solutions.

Shell: Nigeria :: Coke: Columbia

Shell has been having problems in the Nigerian delta for some time now. Though it brings economic activity to a poor country, the vast majority of the wealth created goes to a corrupt goverment - rather than helping the disadvantaged local communities who are the ones primarily affected by the environmental damage that petroleum production inevitably brings. According to the Financial Times (8/22/06), the delta states currently control only 13% of their resources, with the national government controling the rest.

A militant activist group called MEND (Movement for the Emancipation of the Nigerian Delta) has been fighting for the rights of these local groups to capture more of the wealth created by resources being taken from their land. MEND uses illegal and often violent means to reach their arguably noble cause: they are stealing oil, sabotaging piplines, and kidnapping foreign workers.

Recently the Nigerian government has been cracking down harder on these militant activists, promising not only arrests but also "force for force." Last Sunday, as the militants were preparing to release a hostage, government forces attacked and 10 militants were killed in the gun battle. The hostage is now missing.

It's easy to see why Nigerian government wants to defeat MEND - the group is getting in the way of the country's most lucrative resource, and the national government is the primary beneficiary of that resource. Shell's production has been severely limited in recent months and this hurts government revenues in both the short- and long- term.

The government's interests are clear, and it's not surprising that such a corrupt and authoritarian regime is resorting to violence to protect those interests. The CSR question here: does Shell bear responsibility for these deaths? The company might think it doesn't, and see the situation merely as government forces controlling a violent militia. On the other hand, those goverment forces are there to protect Shell's business.

This sounds awfully familiar. Coca Cola is facing a similar situation in Columbia, which U.S. activists have dubbed the "Killer Coke" issue. In this case, Columbian government forces have perpetuated violence and murder against union activists, and Coke doesn't seem to have accepted its implicit guilt. A quickly-growing string of boycotts across college campuses, however, might change its attitude.

Corporate political donations

Interesting article in today's Financial Times ("Lifting the Veil of Secrecy on Corporate Political Donations"). Corporations have been accused of many misuses of their growing power, and not least among these is their political influence. In recent years, public mistrust of corporate political donations has increased in the wake of various political scandals (DeLay, Abramoff) and corporate scandals (Enron, WorldCom).

But there is increasing pressure for change: more shareholder resolutions are calling for transparency in political donations. With 21% of investors voting in favor of these, the movement still doesn't have anywhere near a majority - but this is double the percentage that voted similarly last year. A few companies have already responded by publicly reporting their political donatoins; these include Morgan Stanley, Johnson & Johnson, and McDonald's.

Some shareholder pressure is aimed at ensuring that executives make donations for the good of the company and not for their own personal aims - but it's not clear to me how companies could justify making donations in either case. It's wrong for managers to squander shareholder money, and yet it's also very wrong for shareholders to hurt the rest of the citizenry by leveraging their disproportionate political power to enrich themselves.

Another interesting feature of this article was that, according to a survey by the Committe for Economic Development, two out of three executives say they've faced pressure to make a major political contribution. Though that may be one semi-reasonable motivation, and transparency might help them decline such requests in the future.

Obsessions with growth

I've been doing some research on General Electric lately, and I believe I can safely say, with no damage to confidentiality, that the company would like to grow. No big surprise, huh?

In fact, a July 31 Financial Times article ("GE Plays it Straight to a Tough Audience") explained "how a conglomerate with more than Dollars 150bn in sales can meet its yearly target of adding 10 per cent to profits and growing turnover twice as fast as the world economy." There was also a recent feature in the Harvard Business Review detailing CEO Jeffrey Immelt's recent focus on "growth as a process" - a way of leveraging the company's productivity skills to make growth itself more efficient. In fact, the much-lauded Ecomagination campaign is really just one part of the overall "growth as a process" initiative.

All this is unsurprising, in a way - that small companies want to become large, and that large companies want to become larger. But what we don't perhaps ask often enough is: why? Why would a company want to grow faster than the world economy? Not everyone can do this, by the law of averages, but the vast majority of individual companies want to try. Even if profits are good - return on assets, return on investment, profits as a percentage of sales - it's not enough to run a constant-sized business really really well. Instead, everyone strives to convert success into growth.

Does our economy operate better with large companies dominating the landscape? There are economies of scale to be gained up to a certain point that would vary from industry to industry, but it seems we pursue growth more than efficient scaling would require - especially in the case of a conglomerate like GE. And there's the issue that many people don't like big companies - don't particularly enjoy working for them, living near them, or being forced to shop at them for lack of other options. Many anti-corporate activist are really anti- "big business." So who actually wants this unending pursuit of growth?

There are really two groups who benefit from unlimited corporate growth. The first is investors - who, if they get in on the ground floor of a growing company, turn out to have bought x% of something huge rather than x% of something tiny, and that can create vast amounts of wealth. The second group is managers, who would prefer to manage more peoople and more money rather than less - both for the pure prestige and salary and because this is seen as a mark of their success in helping the company meet its growth targets. In fact, some economic studies have shown that managers tend to pursue revenue growth more than really makes sense (as opposed to profit growth) because of the personal advantages that can have.

A few months ago, I bought Bo Burlingham's book Small Giants because I was intrigued by his premise that companies can be great without trying to be big. Unfortunately, I haven't found the book itself to be very compelling - and that's a shame, because I think this ideas deserves more attention. Think of all the attributes of big business that are annoying - long calls to automated phone lines, retail workers who don't care enough to help you, resumes that disappear into a black hole, big-box stores that dominate the landscape.

I predict that in a few years, we'll suddenly discover that bigger not only isn't better, but it's also not necessarily more efficient. People will increasingly realize that they are willing to pay a premium to shop at small businesses, and willing to work at small companies for less. At the same time, we'll discover that a behemoth isn't the most efficient producer because (for example) its processes become bureacratic, managment loses touch with other layers, strategies aren't implemented consistently, employees are less committed and less productive, and employee turnover is high. Someday in the next decade, I think we'll find that "growth as a process" is outdated, and that sustainable sizing is becoming more widely and openly accepted.

Climate Crisis

Awareness of global warming is growing quickly in the U.S., as Al Gore's book and movie, An Inconvenient Truth, proves very popular among young people. I saw it with our local chapter of Net Impact, which also had a book-group discussion on the same topic. I've also visited the companion website and tried out the carbon calculator there. The most common reaction I've heard to the movie is a new appreciation for the seriousness the "climate crisis" combined with a feeling of frustration that we can't do more. Of course, we can each reduce our own carbon footprint - but one of the messages of the movie is that incremental change isn't going to be enough. So naturally, people want to know how large-scale change can happen, and the official U.S. stance on the Kyoto Treaty isn't very heartening.

Most recently, however, I saw in the August 16 Financial Times that Jagdish Bhagwati (well-known economics professor and author of In Defense of Globalisation) is suggesting an alternative international regulatory structure. He sees the deadlock as stemming from India and China's insistence that they did not cause the CO2 problem in the first place and others' insistence that they are causing it now; in Bhagwati's economics jargon, they are responsible not for the "stock" but for the "flow" of CO2 emissions. He believes that implementing a fee for CO2 production could create a fund for solving the problem, and could also tax those who produce from now on. Past behavior could be dealt with separately, perhaps through a mechanism similar to the Superfund.

It's an interesting suggestion, and has some common sense to it. I'm not completely certain it would work, as there are a dizzying number of factors in these multinational negotiations - but I'm glad to see a big-picture solution suggested by someone in a position to do so.

Terracycle: ecology, profits, and worm poop

Last weekend, a friend was telling me enthusiastically about a Princeton University drop-out who is using worms to turn food waste into plant fertilizer. The company, Terracycle, also recycles spray-bottles to package its product. Oddly enough, today I got an email from a totally unconnected friend, also raving about this same company. Looks like this small firm has somehow passed the media "tipping point" and is getting quite a bit of attention.