Is philantropy part of Corporate Social Responsibility?

There is an ongoing interesting debate regarding the place of philantropy in the CSR arena, which I'd like to share some hightlights and ask your opinion.

First, Wayne Wisser talked about the way Philantrocapitalism endangers CSR:

... the idea that social justice, environmental sustainability, human rights and ethical transparency should be left to the whims of a few super-rich individuals is not only irresponsible, it is dangerous.

In another post, Wayne reflects on the actual role of charity.

Since charity will always be an important part of CSR, the real challenge is how to make sure that it "does what it says on the tin".

Leon Olsen joins the discussion with this important question: "When, for example, {CSR} is related to innovation to deliver services for people in need as a business, it gets more blurred - is it CSR, or is it just smart business?" and concludes

...philanthropy/charity has a role in CSR, but the main concern is how business is conducted, not what you do with the money once you've earned it on doing business. You must earn the money in a responsible way too, and that should be a lot more important and impactful than philanthropy.

Elain Cohen of BeyondBusiness thinks this debate is all about context and the ability to see the wider picture. Thus,

...the CSR elements are delivered when the company develops its business strategy in a socially responsible way. {For instance}, even drug companies should maintain responsible workplaces and environmentally positive practices. The businesses are not giving up the fact they need to make a profit but they are creating a blend of business which provides accesss to medicine to a wider range of people than their strategy would dictate if based on purely economic positioning.

The debate continues with this Washington Post article

an important distinction in measuring CSR was whether to include philanthropy as a criterion. {...} philanthropy can be difficult to measure consistently across companies and, unlike measuring how companies behave in their day-to-day operations, philanthropy can sometimes serve to "greenwash" bad behavior while diverting profits that shareholders could otherwise choose to donate to their own preferred causes.

What is your opinion on this? Do you think philantropy still deserves a part in CSR? Photo credit: CC Vanessa Pike-Russell

Fair Factories Clearinghouse: improving workplaces and supply chains

Brand name companies are held responsible for the operations in their supply chain worldwide, even if the supplier factories are independently owned, local economic entities subject to the national legislation of the country of operation. As a result, Wall-Mart, Gap, Nike and most other multinationals have developed sophisticated supply management systems that include regular audits throughout the entire supply chain. Despite a belief that supply chain audits is not something companies ought to be doing - as it’s essentially a role of government - companies are making great efforts to ensure the factories they work with meet various international standards, requirements and expectations.

In doing so, companies incur significant costs. Suppliers incur costs as well. Both report significant inefficiencies that stem from the fact that while serving a wide range of multinationals, supplier factories are subject to multiple audits, each requiring valuable staff time, and resources and translates into frequent and often unnecessary disruption of operations.

The Fair Factories Clearinghouse (FFC) was established with the purpose to improve workplaces worldwide and reduce the costs of ethical business transactions within a collaborative membership community. The main tool is a software program that enables companies to improve their supply chain compliance while reducing audit costs and overlaps, and sharing information and expertise.

“We joined forces with a consulting organization, World Monitors, to provide an online software solution to manage and share non-competitive information on workplace conditions. The goal was to provide a practical tool to enable companies to conduct ethical sourcing at a much lower price,” says Marianne Voss, Executive Director.

As a result, a global clearinghouse was created in which companies – and factories – can get access to and share data needed to increase efficiency in the work aiming to improve conditions in workplaces. “It is a platform that allows a company can identify where audits have already happened so as to avoid an overlap. To goal is to ultimately reduce the number of audits through intelligent technology.” Concurrently, FFC works to identify other issues in supply chain and workplace management and develop viable solution to be used by member companies. Photo credit: CC @ kenyee

Peanut butter: when a company does not care

Peanut Corporation of America caused a nation-wide salmonella outbreak accounting for 600 cases including 9 deaths. The company filed for bankruptcy to avoid being held responsible in court. This is what happens when a company doesn't care HOW it makes money. When a company's values are as infested as its facilities and represent nothing else than the drive to "turn the raw peanuts on the floor into money," that's when you know the company's over.

But the story doesn't end with a company going down. Consumers' trust suffered another serious punch. A lot of people have cut back on their favorite product just to be safe. The Food and Drug Administration and other peanut butter manufacturers are struggling to regain trust while peanut butter sales drop 20%. It might take companies to make their salmonella tests results public before the trust is completely restored.

You'd think that in this age of increased corporate social responsibility and widespread awareness something like this shouldn't happen. You'd think companies are becoming wiser by avoiding taking unnecessary high social risks. But it still happens, even in the US where government oversight and law enforcement is relatively strong. Photo credit: CC @ Ben McLeod

Why paying your taxes is not corporate social responsibility

Upon returning from a ski trip at Mount Snow, Vermont, where I hadn't had Internet access for a three-day weekend (which might be regarded as an (albeit modest) offset of my unusually large skiing carbon footprint, I came across this The Guardian article (thanks to David of Coethica for pointing it out). The article suggests that a company's fiscal obligations should be regarded as a corporate social responsibility. I disagree and here is why.

Companies have many obligations and most of them are governed by law which makes them legally mandatory. Paying ones' taxes is one of such obligations. A country's government - usually the fiscal authorities - are tasked with enforcing the fiscal law and making sure taxes are paid fully and timely. Tax evasion has harsh legal consequences, therefore most companies wouldn't want to be charged with that. Tax avoidance is trickier because it assumes existance of certain legal loopholes which encourage various schemes. In both cases, it's the job of the fiscal authorities to identify and curb such violations. Some countries are better at this, others are worse. On the contrary, corporate social responsibility is not mandatory. To be a good corporate citizen is a voluntary choice. It's based on a company's internal committment to minimize its social and environmental impact as well as maximize its social and environmental benefits. While some companies have successfully made this decision, others are yet to get there.

In any case, fiscal obligations and corporate social responsibility shouldn't be addressed in the same way. One has to do with complying with the law, the other with changing mentalities, attitudes and behaviors. While both are important, the way we define and promote them are quite opposite.

Sustainability facts on Corporate and Responsible

Here are some interesting sustainability links brought to my attention by readers of this blog. Did you know that:

1. the world will be watching these green industry leaders in 2009?

2. you can reduce your energy consumption using the Google Power Meter?

3. green businesses show resilience in the economic downturn.

4. you can promote sustainability with these facts?

Joanne Bauer: raising human rights standards is good for companies

According to Adam Greene of US Council for International Business, businesses and human rights are an important corporate responsibility issue today. If you follow the news on this subject, you get contradictory reports about companies’ impacts on human rights and it's hard to know where the truth really is. So, in my attempt to find a source of reliable information, I came across Business & Human Rights Resource Centre, an independent resource on companies’ human rights impacts worldwide.

This is a non-profit organization that works to create transparency around corporate conduct in the area of human rights by monitoring over 4,000 companies throughout the world. As an information platform, it simultaneously accomplishes two main things. It informs the public on the positive initiatives undertaken by companies to support and protect human rights worldwide and helps reveal and spread the word about allegations of negative corporate conduct, complicity in and direct violations of these rights.

“By posting both positive and negative stories about the work companies do, we try to encourage them to better respect human rights and take measures to ensure that within their supply chain and throughout their operations they avoid harm to people and maximize their positive contribution,” says Joanne Bauer, Senior Researcher & New York Representative.

Collecting accurate information on the human rights impact of multinational, national and smaller local companies operating throughout the world is a major component of the Resource Centre’s work, which is carried out by a network of regional researchers based in Hong Kong, South Africa, Ukraine, India and soon in Senegal. The Resource Centre also hopes to raise funds to be able to establish researchers in Latin America and the Middle East in the near future. These regional researchers, using their contacts and language skills, have access to under-the-radar stories – both news reports in the local media and reports published by regional and local NGOS.

“Before we post the stories containing allegations of company misconduct on the web-site, we contact companies to invite them to respond. We let them know that we will include their full, unedited response alongside the report or news story. And if they choose not to respond, we let them know that we will indicate next to the story that they were invited to respond, but chose not to do so,” explains Joanne.

The original report and the company’s response/non-response are then sent out in the Resource Centre’s Weekly Update to over 7000 subscribers worldwide. It is also permanently part of the Resource Centre’s on-line library which is used monthly by over 80,000 people in 190 countries and territories. As a result of this balanced approach, about 75% of the time companies chose to provide a response. The response rate varies across regions. For instance, among Chinese companies, the response rate is lower, about 50%.

HIV/AIDS is one of the 150 human rights issues that the Resource Centre covers. Although HIV/AIDS is not usually considered a top human rights concern for companies, the efforts in this area are increasing. For example, Global Business Coalition on HIV/AIDS, Tuberculosis and Malaria(GBC), with a membership of 200 companies, provides assistance and best practices to companies and their supply chains in preventing HIV infections at work, educating their workforce, reducing discrimination and promoting humane treatment of infected workers. Joanne argues that “anybody who has a company operating in a high-prevalence region, particularly in countries of Sub-Saharan Africa where as high as 25% of the population is infected with HIV/AIDS, understands that a sick workforce is a very difficult environment to work in. Whether companies see it as a moral responsibility or just good business, they are increasingly realizing they must do something about it.”

Similarly to GBC, several other organizations such as Global Health Initiative of the World Economic Forum, the Corporate Council on Africa and the World Bank AIDS Public Private Partnership promote the good work companies are doing in the areas of HIV prevention and support for HIV positive employees and their families. However, there are few watchdog organizations working to disclose negative conduct on the part of businesses, such as discriminatory employment practices. This is what prompted the Resource Centre to get involved and apply their ‘carrot-and-stick’ approach aimed simultaneously at encouraging the dissemination and adoption of best practice and discouraging companies from violating the rights of people with HIV/AIDS.

In the end, given that it’s increasingly more difficult for companies to hide their poor practices in the human rights area – and the Resource Centre has greatly contributed to this increased level of transparency – everybody benefits.

“In addition to encouraging companies to do the right thing, the Resource Centre’s work is also good for companies in the business sense, because, among other things, it aims to eliminate the free rider problem. For example, if some factories can get away with sweatshop conditions or child labor to keep their costs down and secure contracts, that’s an incentive for other companies to do the same. Therefore, we need to raise the standards for all companies, creating a competitive environment where businesses can thrive without harming people in the process,” concluded Joanne Bauer.

Photo credit: CC riacale

Do you have a question for Georg Kell of UN Global Compact?

That's right. Georg Kell, Executive Director of UN Global Compact, agreed to have a discussion on the hottest topics on corporate responsibility and sustainability. Now I hope to engage you, the readers of Corporate and Responsible, to take part in what promises to be a very interesting conversation.

Since UN Global Compact is the largest international citizenship and sustainability initiative in the world - with over 4700 corporate participants and stakeholders from over 130 countries - I thought it would be more exciting - and totally in line with the UN principles - to go beyond geographical boundaries and invite you to participate in the conversation as well.

Therefore, before I go into this meeting with a list of my own questions, I'd like to offer each of you the opportunity to ask Georg Kell your questions. Please leave your questions below so that everyone can see them. I do reserve the right to select the most relevant questions. Thank you and I look forward to hearing from you!

CEO salary cap and how it affects New York City

Is it OK for the US government to cap executive compensation or not?

After the announcement of Obama's plan to cap senior executive pay in the companies that received bailout money, the bloggers, along with the rest of the public, are divided. Many think this is the ethical thing to do since it's unacceptable to use public money to pay exorbitant compensation to people who, by virtue of their risk-laden business, have generated a severe global recession. Others think it's outrageous to allow government to interfere in such unprecedented way in corporate affairs.

While more inclined to stand with the salary cap supporters, I'm still hesitant. And not because I feel sorry for the bonuses that executives might forgo. Public money helped them keep their jobs, so they are much better off than the millions of already and soon-to-be unemployed. The reason I'm hesitant is because this is bad news for New York City. It is well-known that Wall Street bonuses helped make the City a very nice place to live: clean, safe, with plenty affordable services, public and private, great food and vibrant cultural life. The City thrived on those high salaries and bonuses. Today, the City budget is already severely strained. The City people are gloomy. The City businesses are hurting.

Therefore, I will agree with Hugo Lindgren of New York Magazine who thinks that, although our first instinct is to punish the Wall Street moneymakers, such actions might be counterproductive. Simply because, in case we forgot, "the world needs a healthy US market to buy and sell into, with Wall Street as the indispensable intermediary." And because I wouldn't want to see things get worse, I will also agree with Hugo that the City - and by extension the world - will only benefit when "the profits come back to Wall Street, and the bonuses, too."

Photo credit: CC epicharmus

Net Impact Chapter at Milano The New School

It was nice to learn that Milano The New School for Management and Urban Policy - the school I graduated from back in 2006 - has recently launched a Net Impact Student Chapter. Marc Albion, co-founder of Net Impact, and Peter Patch, founder and president of Patch & Associates LLC, spoke at the launching event, which was attended by an impressive group of students.

Net Impact is an organization that serves students, particularly MBAs, and professionals in their efforts to build sustainable and responsible businesses. The fact that a new Net Impact Chapter was established in a policy school speaks of the importance of a wide range of skills to achieve a sustainable economy. By merging the principles of Net Impact and The New School, the Chapter is set "to improve the world by growing and strengthening a network of leaders committed to the social good." This Chapter will seek to engage business leaders AND support new leaders so that they contribute their skills in policy, finance, management and design to the advancement of the triple bottom line approach in the way of doing business.

Congratulations and good luck to the students who are leading these efforts! As alumna, I encourage other alumni involved and interested in corporate responsibility and sustainability to participate and support this group.

How American companies shape the corporate responsibility agenda (Part II)

LC: Continuing our discussion on the corporate responsibility challenges facing multinational companies, what about the relationship between business and human rights?

Adam Greene: Business and human rights is another big issue right now. Some groups blame companies for complicity in violating human rights by supporting oppressive governments in countries like Congo, Myanmar and Zimbabwe. Paying legal taxes in these countries is considered providing support to these governments. How can a company both be compliant and refrain from paying taxes? Who will decide where it’s OK to pay taxes and where it’s not? It’s very difficult to say when governments violate human rights. Many groups have claimed that the US government has violated human rights. So, does it mean companies should stop paying taxes in the US as well?

While it is easy for governments, particularly oppressive ones, to ignore criticism, brand name companies find it very hard to ignore any criticism; therefore they are willing to engage into discussion and try to find a solution. However, in spite of a company’s willingness to help, it can’t change all things in a country. What a company can do is to make sure it does not contribute to any problems and maybe help where possible. But dumping responsibility for issues generated by government failures onto companies is not wise and even somewhat dangerous. Companies cannot and should not replace governments. A company should not act as a judge or police. It would be undemocratic.

LC: If having companies ensure compliance in their supply chain is a short-term solution, what would be an effective long-term solution?

AG: The long-term solution is to improve the capacity of national governments to implement and enforce their laws. The ILO works with its member governments to learn from what companies are doing with their suppliers and apply that in relation to the rest of the factories. Through ILO’s Better Work Program, multinational companies partner with suppliers and national governments to improve labor standards while raising local competitiveness. This type of corporate responsibility initiative aims to improve overall legal compliance and enforcement in a country.

LC: What is your opinion about the campaign against Nestlé’s infant formula?

AG: Although the problem has come up because of Nestlé’s product, the real issue is related to lack of access to clean water. The campaigners are against this product because it relys on access to clean water, which can be difficult to find in many areas. However, many people drink contaminated water every day. So the real question is: shouldn’t every country strive to provide its citizens with clean water regardless of infant formula? So, the problem is not Nestle or its product. The problem is lack of investment in local infrastructure. Even if Nestle stops manufacturing this product locally, access to clean water remains a pressing problem, as does adequate nutrition for infants.

LC: What do you think of Denmark's recent passing of a law that makes CSR reporting mandatory?

AG: I think that’s a bad idea. Reporting is a form of communication to the key audiences. The first problem with a single CSR report is that there is no single audience for CSR information. In the US, the audience for CSR reports is the company’s employees. Most shareholders generally don’t read these reports. The general public certainly doesn’t read them. Mainstrean investors don’t read them. Suppliers usually don’t read them unless it relates to their operations. And most government agencies don’t read them. Companies provide each of these groups with different kinds of information, written in the most relevant way for that group.

Yet, a CSR report is good for pulling information together, recognizing that it does not have a wide readership. So, given that, CSR reports are only useful to the extent the information they provide is being managed within the company. If it's collected only for the sake of reporting, that's no good. And mandating CSR reporting might have this effect, thus failing to be adequately used internally and effectively reach a target audience. Therefore, this would be the wrong way to promote corporate responsibility. CSR beyond compliance is voluntary and should remain so, because good behavior simply cannot be mandated.

LC: Thank you very much for your contribution!

How American companies shape the corporate responsibility agenda

US Council for International Business (USCIB) advances the global interests of American businesses both in the US and abroad, and contributes with opinions and solutions to a vast array of international policy issues. I talked with Adam Greene, Vice-President of Labor Affairs and Corporate Responsibility, about current topics on the corporate responsibility agenda with focus on the business perspective.

LC: What does USCIB do and what is its role in shaping the international corporate responsibility agenda?

AG: USCIB is a policy organization that serves global multinational companies. We provide our members with information and analysis on a wide range of issues pertaining to international business in various sectors and regions. Concurrently, we provide our members the ability to contribute to the development of international policy. We are the sole representative of US businesses in three main international business organizations – International Chamber of Commerce (ICC), International Organization of Employers (IOE) and the Business and Industry Advisory Committee to OECD (BIAC). These organizations feed into major international structures such as the United Nations, International Labor Organization and OECD.

Corporate responsibility and labor affairs have been on the agenda of these organizations since the 1970s, but our corporate responsibility work started in 2000 as a result of the revision of the OECD Guidelines for Multinational Enterprises. Initially, our members focused on developing internal codes, policies and frameworks on some key issues such as human rights and labor issues. Over time, the focus shifted onto the external environment that includes such key areas as the policy making environment, supply chain and stakeholder engagement.

LC: What served as motivation for companies to engage in corporate responsibility initiatives? Was it generated by self-awareness or pressure coming from various advocacy groups?

AG: Both. A lot of the earlier motivation was internal. In the US, philanthropy and community engagement is still very big component of what people see as their social responsibility. There are hundreds of years of experience of engaging with communities, hence the internal motivation of companies to do ‘good’ work. It also depends on the sector. In the area of environmental protection, corporate responsibility began with a legal framework that set high environmental standards that companies had to follow. Compliance with the law led to strong corporate programs in environmental protection. Consequently, companies wanted to get something out of their resources dedicated to compliance, so they went beyond legal environmental standards toward meeting customers’ needs and making money for shareholders. In the US, many CSR-related issues have aspects that are covered by law, so compliance is a very important and distinct area for US companies. Everything else beyond compliance, although highly encouraged, is voluntary.

LC: What are the major corporate responsibility challenges facing multinational companies today?

AG: The key challenges today are related to the supply chain and human rights issues. Regarding supply chain, most US companies have sound internal policies and are compliant with the US law. The problems stem from independently-owned supplier factories that fail to comply with their national law. In response, many companies developed advanced supply chain management programs to ensure their suppliers comply with the law. Even so, the root problem of non-compliance has still not been solved.

LC: Why not?

AG: Because companies alone cannot – and should not be expected to – ensure law enforcement throughout supplier countries. US companies usually work with a very small fraction of the factories in any given country. The responsibility to ensure that local factories comply with the law rests with the local government, not foreign companies. Having companies step in and enforce compliance in their supply chain is only a short-term solution.

Many companies are conducting thousands of audits of their suppliers annually in the name of corporate responsibility. Most companies are not in the business of inspecting factories all over the world, but they do so because they cannot rely on national governments to enforce the minimum legal standards in the supplier factories. So, a lot of what’s being done now is filling a gap, which wouldn’t be happening in a perfect world.

Although people blame globalization for this, the biggest global problem facing international business rests with the huge gap between what the law in developing countries says and what actually happens there. When the US imports goods from Canada, nobody has a problem because Canada enforces its laws. When the US imports from Mexico, there are many problems precisely because Mexico fails to enforce its laws properly.

Environmental sustainability: are we there yet?

Since we were talking about the state of sustainability in New York, the recently launched State of Green Business 2009 report adds on to that discussion.

The GreenBiz team, headed by Joel Makower, set off to assess the state of green business wondering, like many of us, whether there is "a fundamental shift taking place in business — one that will have a lasting salutary effect on planet Earth? Or are companies simply nibbling at the edges of these problems?"

Their research brought them to a no-suprise conclusion: "We're barely scratching the surface from an environmental perspective. As much as companies have done to clean up their act, they've got a long, long way to go." I would only extend this urge to include all of us: individuals, governments, not-for-profit organizations, universities, enterpreneurs, research institutes, etc. And maybe we all should be more creative in our ways of addressing environmental sustainability because, as Mallen Baker said it well, the real challenge in changing behaviours, attitudes and habits is to "get people much more closely in touch with how much they consume."

The findings of this report are being discussed at the State of Green Business Forum in San-Francisco. I hope future developments in this area can help sustain our dwindling optimism. Photo credit: CC Mornby

Super Bowl 2009 Responsible Ads

The commercials that made it to my Super Responsible Ad list are:

General Electric: Wind Enegy for investing in clean energy



Kellog's: Plant a Seed for giving back to communities



Pedigree: Crazy Pets for compassion

Going green: from skiing to Super Bowl

Yesterday I went skiing at Hunter Mountain for the first time. While skiing down nice trails named after New York City streets, I was thinking about the carbon footprint of this type of entertainment. So I found Marc Gunther's post "Greening Skiing" timely and thought-provoking. Photo credit: Chaval Brasil

Today is the Super Bowl Sunday in the US. The first good news is that it's the greenest Super Bowl ever. Another good news is that there will be many commercials with some kind of corporate responsibility message. While most football fans will be watching the game, I'll be watching and rating Super Bowl adds for my own Super Responsible Ads list. For instance, General Electric is ready to launch a Smart Grid Campaign at this event.