By Aron Cramer, President and CEO
Now that oil has stopped flowing into the Gulf of Mexico, it is time to consider the lessons that can be drawn from the Deepwater Horizon spill.
Most of our collective attention has focused on what went wrong on the rig. We’ve also spent a lot of time wondering why the federal government couldn’t summon the wherewithal to plug the leak, and even whether President Obama was angry enough.
But any honest assessment of what’s gone wrong must lead us right back to ourselves. The common thread that runs from the spill in the Gulf to the mortgage crisis to the spate of suicides at the Chinese factory producing iPods and iPads is insatiable consumer demand for more and more, at lower and lower prices. We all like inexpensive gasoline, the latest shiny electronic gadgets, and mortgages cheap enough to let us trade up to a larger house. But as we have seen this year, neither our economy nor our planet can sustain this demand.
The good news is that a more promising commercial model—one based on “sustainable consumption”—is emerging as a viable alternative. This concept, which is being embraced by corporate mainstays like Nike, Best Buy, Levi Strauss & Co., and Unilever, boils down to one simple idea: delivering more value with less stuff.
For too long, sustainability has been understood to mean only limits and restrictions. Sustainable consumption turns this idea on its head, as a way to unleash business innovation to develop products and services that deliver better living standards without further burdening our already overtaxed planet.
Some companies have already figured this out. Best Buy is investing in home information-management systems that provide not only video on demand, but also data that help you reduce your home energy bill. Nike is exploring “closed loop” manufacturing models that take most of the waste out of its athletic footwear. Levi’s is calling on customers to wash their 501s in cold water (and turn used jeans over to Goodwill), slashing the energy used to clean your clothes, which in turn saves money. eBay’s business model, which essentially recycles mountains of goods, prevents the need to devote new resources to make new products.
The beauty of sustainable consumption is that it doesn’t rely on all of us becoming better or more virtuous people. Instead, it aims to make every consumer a partner with companies in constructing an economy that uses natural resources more wisely. This will limit the need to “drill, baby, drill” in every corner of the globe, and it will quell our hunger for ever more exotic financial instruments and Chinese factories that can pump out new products faster and faster.
Sustainable consumption is also the best possible safeguard against a systemic natural resource crash that could be every bit as disruptive as the crash of the financial system in 2008. The evidence suggests that the risk of that is real. It appears that 2010 will be the hottest year on record, heightening the urgency to solve climate change. The Global Footprint Network estimates that we are using 40 percent more resources today than the planet can supply, and that this will rise to 100 percent by the middle of the next decade. If we are to maintain advances in living standards around the world, it’s clear that we need new business models, as well as innovation and new public policies, to make the leap to a genuinely sustainable economy.
It’s tempting to finger BP or Goldman Sachs as the exemplars of all that’s wrong with the economy. But let’s not debate whether things went as they should have in the Gulf or on Wall Street: They didn’t. Instead, let’s focus on the cure. The post-recession, post-oil-spill economy should embrace a vision of business—and consumption—that creates value without causing blowouts either on oil rigs or in financial systems. If we do that, we will be one step closer to an economy that can deliver prosperity for a planet with seven billion people.
Friday, August 27, 2010
Tuesday, August 24, 2010
WSJ Takes Aim at...Corporate Responsibility?
By Aron Cramer, President and CEO
In a year when all eyes have been on the oil spill in the Gulf, automobile recalls, and the ongoing debate over behavior in the banking system, the Wall Street Journal—inexplicably—weighed in today by publishing a piece titled "The Case Against Corporate Social Responsibility." University of Michigan business school professor Aneel Karnani's piece was nothing more than a rehash of the arguments first made more than four decades ago by Milton Friedman. His assertion that delivering returns for shareholders is the only responsibility of business was wrong then, and it is wrong today, as even Jack Welch now acknowledges.
These arguments get trotted out every so often, as The Economist did in a 2005 cover story that it essentially recanted in 2008. Still, it is incomprehensible to me that anyone would still argue that companies considering the economic, social, and environmental impacts of their operations are making a mistake. Not surprisingly, Karnani could not provide a single example of when corporate responsibility has inflicted harm. The weak support for his arguments may be because there is such considerable evidence to the contrary. Most companies have discovered—to their benefit and ours—that considerable opportunity awaits companies that leverage their resources to tackle the world's biggest challenges.
I have the privilege of leading BSR, an organization that works with nearly 300 member companies—including some of the largest in the world—to integrate social, ethical, and environmental principles into their business strategies. In my experience, companies like GE, Nike, Ford, and Hitachi embrace corporate responsibility both as a means of advancing their commercial interests and to address big global challenges like health, energy, mobility, and efficiency. The examples of their impact are easy to come by: By developing more efficient trucks, Walmart has saved immense amounts of money while reducing its logistics costs. Nike has used sustainability to innovate new products such as those in its Considered line, which are designed with fewer toxics and waste and more environmentally preferred materials. And Unilever is using corporate responsibility to find new market opportunities for everyday products including soap and tea. What's more, new companies such as Method, and older enterprises such as Seventh Generation have built their very identities around environmental questions.
These are just a few of the cases that prove that companies focusing on corporate social responsibility not only generate profits, they also benefit society. Indeed, if, as Karnani posits, a focus on CSR were "dangerous," we would not see so many companies reporting publicly on their corporate responsibility efforts, nor would we see so many business school students (including many of those at the University of Michigan, where Karnani teaches) flock to work for companies that embrace a social purpose along with their business interests.
The businesses that embrace corporate social responsibility are best positioned to grasp the market opportunities in our fast-changing world. Karnani does business a disservice by rejecting an idea that has great power and potential.
Professor Karnani teaches at the Ross School of Business at the University of Michigan. That's where I'll be in October, speaking at the annual conference of Net Impact, a wonderful organization that promotes CSR in business schools. I suspect that the 1,500 business students who attend the conference each year will have something to say about Professor Karnani's "case" against CSR. I wonder if the good professor will try to convince these ambitious business students that they should forsake their interest in CSR. Maybe he'll be out of town instead.
In a year when all eyes have been on the oil spill in the Gulf, automobile recalls, and the ongoing debate over behavior in the banking system, the Wall Street Journal—inexplicably—weighed in today by publishing a piece titled "The Case Against Corporate Social Responsibility." University of Michigan business school professor Aneel Karnani's piece was nothing more than a rehash of the arguments first made more than four decades ago by Milton Friedman. His assertion that delivering returns for shareholders is the only responsibility of business was wrong then, and it is wrong today, as even Jack Welch now acknowledges.
These arguments get trotted out every so often, as The Economist did in a 2005 cover story that it essentially recanted in 2008. Still, it is incomprehensible to me that anyone would still argue that companies considering the economic, social, and environmental impacts of their operations are making a mistake. Not surprisingly, Karnani could not provide a single example of when corporate responsibility has inflicted harm. The weak support for his arguments may be because there is such considerable evidence to the contrary. Most companies have discovered—to their benefit and ours—that considerable opportunity awaits companies that leverage their resources to tackle the world's biggest challenges.
I have the privilege of leading BSR, an organization that works with nearly 300 member companies—including some of the largest in the world—to integrate social, ethical, and environmental principles into their business strategies. In my experience, companies like GE, Nike, Ford, and Hitachi embrace corporate responsibility both as a means of advancing their commercial interests and to address big global challenges like health, energy, mobility, and efficiency. The examples of their impact are easy to come by: By developing more efficient trucks, Walmart has saved immense amounts of money while reducing its logistics costs. Nike has used sustainability to innovate new products such as those in its Considered line, which are designed with fewer toxics and waste and more environmentally preferred materials. And Unilever is using corporate responsibility to find new market opportunities for everyday products including soap and tea. What's more, new companies such as Method, and older enterprises such as Seventh Generation have built their very identities around environmental questions.
These are just a few of the cases that prove that companies focusing on corporate social responsibility not only generate profits, they also benefit society. Indeed, if, as Karnani posits, a focus on CSR were "dangerous," we would not see so many companies reporting publicly on their corporate responsibility efforts, nor would we see so many business school students (including many of those at the University of Michigan, where Karnani teaches) flock to work for companies that embrace a social purpose along with their business interests.
The businesses that embrace corporate social responsibility are best positioned to grasp the market opportunities in our fast-changing world. Karnani does business a disservice by rejecting an idea that has great power and potential.
Professor Karnani teaches at the Ross School of Business at the University of Michigan. That's where I'll be in October, speaking at the annual conference of Net Impact, a wonderful organization that promotes CSR in business schools. I suspect that the 1,500 business students who attend the conference each year will have something to say about Professor Karnani's "case" against CSR. I wonder if the good professor will try to convince these ambitious business students that they should forsake their interest in CSR. Maybe he'll be out of town instead.
Wednesday, August 18, 2010
Summer Reading and Climate Change: A Tale of Two Novels
By Aron Cramer, President and CEO
Leaving Heathrow in mid-July, I picked up two novels for my summer vacation reading. One, Ian McEwan’s Solar, was an obvious choice. What could be better than seeing one of my favorite authors, anointed by many as the reigning champion of English-language fiction, take on the topic of renewable energy? The other book, Financial Times columnist Lucy Kellaway’s In Office Hours—her latest take on businesspeople behaving badly—was ostensibly a light read, with little link to sustainability.
With my vacation now (sadly) in the past, I can say that both books are worth reading. Sustainability is at the center of McEwan’s book, and is but a supporting actor in Kellaway’s. His book focuses on clean tech, and hers is about how a major oil company deals with sustainability. McEwan’s lead character, an academic who stumbles into a role promoting solar energy, is a largely unsympathetic man, who occasionally does the right thing—though usually for the wrong reasons. Kellaway’s two protagonists are essentially decent women who succumb to temptation and poor judgment.
Surprisingly, Kellaway’s book, with the folly of workplace affairs at its center, actually provides more insight about how the transition to low-carbon energy is likely to play out.
Her fictional oil company, Atlantic Energy, has an ambivalent relationship with sustainability. Her lead character, a member of the company’s board, shows flashes of genuine interest in sustainability, and strains to make the financial case for new investments in a volatile economy. The CFO dreads having to sit down with environmental campaigners. The company is aggressively looking at whether a major investment in renewables can be profitable, while remaining culturally and financially tied to oil, to the point of putting on old barrel in its lobby, despite the apparent violation of its own health and safety rules (real energy company execs will find this implausible).
Meanwhile, McEwan too often plays his title character, Solar, for laughs. It’s not news that advocates of renewable energy are fully human, with the same foibles that afflict everyone. Worse, many of the laughs are obvious, such as the misadventures of Michael Beard, the scientist at the center of the book, who exposes himself to the frigid temperatures in embarrassing ways on his obligatory trip to the Arctic.
Kellaway, on the other hand, who uses human comedy as the foundation of her book, shows how hard it is for new paradigms to break through the politics and economics of sustainability amid the daily drumbeat of stock analysts who can drive down a company’s share price for the smallest misstep of unconventional statement.
It’s likely that McEwan’s book will be remembered much longer than Kellaway’s, though hers says more about how hard it is to make change happen. Hers is also funnier, and more sympathetic.
But both books reinforce the crucial point, often forgotten by all of us in the sustainability world, that, all too often, human and organizational behaviors affect outcomes as much as climate summits, technological innovation, or grand pronouncements by political leaders. Fiction, it turns out, has much to teach us about sustainability.
These two books are good reads for anyone lucky enough to still be looking forward to their summer vacations. And they sure beat taking a CSR report to the beach.
Leaving Heathrow in mid-July, I picked up two novels for my summer vacation reading. One, Ian McEwan’s Solar, was an obvious choice. What could be better than seeing one of my favorite authors, anointed by many as the reigning champion of English-language fiction, take on the topic of renewable energy? The other book, Financial Times columnist Lucy Kellaway’s In Office Hours—her latest take on businesspeople behaving badly—was ostensibly a light read, with little link to sustainability.
With my vacation now (sadly) in the past, I can say that both books are worth reading. Sustainability is at the center of McEwan’s book, and is but a supporting actor in Kellaway’s. His book focuses on clean tech, and hers is about how a major oil company deals with sustainability. McEwan’s lead character, an academic who stumbles into a role promoting solar energy, is a largely unsympathetic man, who occasionally does the right thing—though usually for the wrong reasons. Kellaway’s two protagonists are essentially decent women who succumb to temptation and poor judgment.
Surprisingly, Kellaway’s book, with the folly of workplace affairs at its center, actually provides more insight about how the transition to low-carbon energy is likely to play out.
Her fictional oil company, Atlantic Energy, has an ambivalent relationship with sustainability. Her lead character, a member of the company’s board, shows flashes of genuine interest in sustainability, and strains to make the financial case for new investments in a volatile economy. The CFO dreads having to sit down with environmental campaigners. The company is aggressively looking at whether a major investment in renewables can be profitable, while remaining culturally and financially tied to oil, to the point of putting on old barrel in its lobby, despite the apparent violation of its own health and safety rules (real energy company execs will find this implausible).
Meanwhile, McEwan too often plays his title character, Solar, for laughs. It’s not news that advocates of renewable energy are fully human, with the same foibles that afflict everyone. Worse, many of the laughs are obvious, such as the misadventures of Michael Beard, the scientist at the center of the book, who exposes himself to the frigid temperatures in embarrassing ways on his obligatory trip to the Arctic.
Kellaway, on the other hand, who uses human comedy as the foundation of her book, shows how hard it is for new paradigms to break through the politics and economics of sustainability amid the daily drumbeat of stock analysts who can drive down a company’s share price for the smallest misstep of unconventional statement.
It’s likely that McEwan’s book will be remembered much longer than Kellaway’s, though hers says more about how hard it is to make change happen. Hers is also funnier, and more sympathetic.
But both books reinforce the crucial point, often forgotten by all of us in the sustainability world, that, all too often, human and organizational behaviors affect outcomes as much as climate summits, technological innovation, or grand pronouncements by political leaders. Fiction, it turns out, has much to teach us about sustainability.
These two books are good reads for anyone lucky enough to still be looking forward to their summer vacations. And they sure beat taking a CSR report to the beach.
Tuesday, August 10, 2010
Happiness for Sale?
By Cody Sisco, Manager, Advisory Services
Decisions about how we spend our money can affect our happiness, but only under the right conditions. Based on the emerging social science of “happiness studies,” and as reported by the New York Times, “our types of purchases, their size and frequency, and even the timing of the spending all affect long-term happiness.”
Beyond a certain level required to meet basic needs, more income and purchasing power don’t necessarily translate into greater happiness. However, money spent on leisure and services—including vacations and meals—and on calculated purchases that are planned and anticipated over substantial periods of time, can add to happiness. This has implications for sustainability and our shift toward sustainable consumption.
Companies should seek to understand the links between sustainable consumption, happiness, and customers, and use this insight to change what products and services they offer and how they market them.
Through our recent report and through workshops we are holding with companies, BSR is exploring opportunities for business to champion sustainable consumption. Here are some initial tips for how companies can create value (and happiness) for consumers without creating more stuff:
Decisions about how we spend our money can affect our happiness, but only under the right conditions. Based on the emerging social science of “happiness studies,” and as reported by the New York Times, “our types of purchases, their size and frequency, and even the timing of the spending all affect long-term happiness.”
Beyond a certain level required to meet basic needs, more income and purchasing power don’t necessarily translate into greater happiness. However, money spent on leisure and services—including vacations and meals—and on calculated purchases that are planned and anticipated over substantial periods of time, can add to happiness. This has implications for sustainability and our shift toward sustainable consumption.
Companies should seek to understand the links between sustainable consumption, happiness, and customers, and use this insight to change what products and services they offer and how they market them.
Through our recent report and through workshops we are holding with companies, BSR is exploring opportunities for business to champion sustainable consumption. Here are some initial tips for how companies can create value (and happiness) for consumers without creating more stuff:
- Product design: Embrace the concept of “less (stuff) is more (happiness).” Understand the potential links between reducing environmental impact while creating more value for consumers.
- Consumer engagement: Find ways to build social interactions, which increase happiness, into your marketing strategies. Social networking sites like Yelp and Facebook can create communities that are linked to your products and services.
Friday, August 6, 2010
Protecting Human Rights in a Networked Age
By Dunstan Allison Hope, Managing Director, ICT Practice, Advisory Services
Recent restrictions announced by the governments of the United Arab Emirates and Saudi Arabia on the use of BlackBerry services—citing various national security concerns—have shed light on challenging ethical questions that are growing in importance for major global companies across the whole information and communications technology (ICT) industry.
If you’ve closely followed mainstream media over the past few years, it would be understandable to conclude that almost all responsibility for protecting freedom of expression and privacy online lies in the hands of Google, Yahoo! and Microsoft. The media became so obsessed by a small number of high-profile brands that it dangerously drew our collective attention away from issues of great relevance elsewhere in the industry.
But over the past 18 months, attention has started to gradually shift. The (now defeated) Green Dam, Youth Escort proposals in China highlighted that PC brands could play a major role in restricting freedom of expression where governments demand it, while the 2009 Iranian elections sparked a debate about the ethics of selling telecommunications equipment into countries with poor human rights records.
So now that internet services providers, PC brands, telecoms network equipment manufacturers, and handset firms have all felt the heat on privacy and freedom of expression, what does this say about human rights in the ICT industry?
Here are three key points for ICT companies:
Recent restrictions announced by the governments of the United Arab Emirates and Saudi Arabia on the use of BlackBerry services—citing various national security concerns—have shed light on challenging ethical questions that are growing in importance for major global companies across the whole information and communications technology (ICT) industry.
If you’ve closely followed mainstream media over the past few years, it would be understandable to conclude that almost all responsibility for protecting freedom of expression and privacy online lies in the hands of Google, Yahoo! and Microsoft. The media became so obsessed by a small number of high-profile brands that it dangerously drew our collective attention away from issues of great relevance elsewhere in the industry.
But over the past 18 months, attention has started to gradually shift. The (now defeated) Green Dam, Youth Escort proposals in China highlighted that PC brands could play a major role in restricting freedom of expression where governments demand it, while the 2009 Iranian elections sparked a debate about the ethics of selling telecommunications equipment into countries with poor human rights records.
So now that internet services providers, PC brands, telecoms network equipment manufacturers, and handset firms have all felt the heat on privacy and freedom of expression, what does this say about human rights in the ICT industry?
Here are three key points for ICT companies:
- First, human rights of freedom of expression and privacy are directly relevant for all companies in all parts of the ICT value chain. Companies can no longer say: “That’s mainly an issue for internet companies, but not really for us.”
- Second, there is a need for the ICT industry and its stakeholders to better understand how the ICT network—as a whole ecosystem, rather than as separate components—impacts human rights. Different parts of the ICT value chain are highly interdependent and the system as a whole can be designed to minimize risks to human rights at every stage of the ICT value chain.
- Third, we’re diving deeper and deeper into a game of cat-and-mouse between governments and ICT companies, where governments will seek to impose increasingly sophisticated surveillance and filtering technologies and methods on (unwilling) companies.
- Undertake a companywide human rights assessment to understand which products, services, technologies, operations, and customers present the greatest risks (and opportunities) for human rights. In today’s game of cat-and-mouse, it pays to be one step ahead.
- Become active participants in global, industrywide dialogues (such as the Global Network Initiative) to drive collaborative, pro-human rights agendas in the ICT industry as a whole.
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