Food for thought: The NON financial crises and CSR

In the midst of the financial crisis media hype, it is easy to forget that other "non-financial" crises continue unabated. I am particularly struck at the moment by the food crisis and its implications for CSR. Here are some of the facts, according to Oxfam:

• The number of malnourished people in the world rose by 44 million in 2008
• In the horn of Africa, 17 million people are on the brink of starvation
• Five months after countries pledged $12 bn to the global food emergency, less than $1 bn has been given
• Meanwhile, over 30% of the world's grain crop goes to feeding animals rather than people directly
• And food companies continue to see sales and profits rise, e.g. Nestle's global sales rose 8.9% January to June and Tesco saw profits up 10% from last year

Of course, food is not the only silent crisis in our midst. A recent study by Pavan Sukhdev, the Deutsche Bank economist who led a European study on ecosystems, reports that we are losing natural capital worth between $2-5 trillion every year as a result deforestation alone. Compare that with the losses incurred so far by the financial sector of "only" $1-1.5 trillion.

As George Monbiot argues in The Guardian, the two crises have the same cause. "In both cases, those who exploit the resource have demanded impossible rates of return and invoked debts that can never be repaid. In both cases we denied the likely consequences".

What are the implications for CSR? Are we seeing a food crisis looming at the macro-scale similar to what we saw in Zimbabwe at a micro-scale? And in this case, do companies with operations in developing countries need to start thinking about food security as one of their first and main CSR priorities? Or perhaps business should be lobbying Western governments to deliver on their aid promises? Maybe companies, with their vast land ownership and excess capital, should be the leaders in a reforestation revolution on a massive scale?

One thing is for sure, both the food and ecological crises are likely to get worse rather than better in the coming recession years. And companies, especially those in the food and extractives sectors, are going to find it increasingly hard to justify excessive profits when people around the world are dying from starvation and the world's lungs are being damaged by cancerous economic growth.

CSR, G8 & G5: The Heiligendamm Dialogue Process

Tomorrow, by invitation, I will be giving "expert" input on CSR to The Heiligendamm Dialogue Process at a meeting they are holding in Mexico City.

If you're wondering what The Heiligendamm Dialogue Process is, you're not alone. I had never heard of it until I got the invite. In fact, it is probably the closest thing we have to a statement by the world's regional superpowers on how CSR fits into the bigger picture of global development. Here's how they describe themselves:

"The leaders of the G8 and the G5 countries (Brazil, China, India, Mexico and South Africa) discussed the major challenges that have arisen in the world economy at the Heiligendamm Summit in 2007. They recognised the interdependence of their economies and the importance of an active exchange on the framework conditions of a globalized and competitive world economy. They decided to embark on a high-level, structured dialogue on specific challenges which was subsequently referred to as the Heiligendamm Dialogue Process (HDP)."

So what does that have to do with CSR? Well, one of the four main topics for the Dialogue Process, which is hosted by the OEDC, is: "Promoting cross-border investment to our mutual benefit including the encouragement of responsible business conduct". 

A more lengthy document (38 pages) on "Growth and Responsibility in the World Economy", issued as a G8 Summit Heiligendamm Declaration on 7 June 2007, makes fascinating reading. Not least because, according to the G8,  the outlook was all sunshine and roses barely a year ago. "We note that the world economy is in good condition". How quickly the world can change! But beyond that, there is some very revealing content on CSR and broader socio-economic and environmental trends. Below, I have tried to summarise some of the main points:

SUMMARY

1. G8 Agenda for Global Growth and Stability (p.1-2) - This opening section makes it clear that the developed world's obsession with economic growth as the solution to social and environmental challenges continues. What is interesting (and different), however, is that there is now more acknowlegement about the importance of stability in financial markets and the distribution of the benefits of globalization.

2. Systemic Stability and Transparency (p.3) - This section reads like deja vu and shows that our current financial crisis did not arise from a vacuum or without the knowledge of the superpowers. In relation to global financial markets, especially hedge funds, they refer to "potential systemic and operational risks" and "the need to be vigilant". I guess no one (or at least no one that mattered) was really listening?

3. Freedom of Investment (p.4-6) - This is the familiar "free capital flow" mantra, acknowledging that "supporting protectionism would result in a loss of prosperity". How does this reconcile with the continued protectionism of EU agriculture and US fossil fuels I wonder?

4. The social dimension of globalization (p.7) - The fact that this is even being acknowledged is progress. The emphasis is on "promoting and developing social standards", like the ILO Triparite Declaration, OECD Guidelines for Multinationals and the UN Global Compact. 

5. Strengthening the principles of CSR (p.7) - In addition to emphasising and supporting the above-mentioned social standards, there is reference to "the voluntary approach of CSR" and encouraging "the transparency of private companies' performance with respect to CSR" and "clarification of the numerous standards and principles issued in the this area". Given that this is the main section on CSR, it is quite weak and disappointing, with a fairly limited conception of CSR.

6. Promoting and protecting innovation (p.9-12) - This section hints at technology transfer, but is far more about protecting intellectual property (patents), claiming that "trade in pirated and counterfeit goods threatens health, safety and security of consumers worldwide, particularly in poorer countries". No guessing which country-block wrote this section then.

7. Climate and energy (p.13-28) - This forms the bulk of the paper, focusing on energy security, energy efficiency and climate change. Although there are no revelations, it is quite a good summary of where the world is at on these issues and how it has responded to date. For example, it talks about the Global Energy Security Principles, the post-Kyoto deal, deforestation, biodiversity, sustainable buildings, transportation, industry, power generation, energy diversification, etc.

8. Responsibility for raw materials (p.29-32) - This focuses on transparency and "sustainable growth" in the mining sector, mentioning the likes of the Extractive Industries Transparency Initiative (EITI), the OECD Risk Awareness Tool for MNEs in Weak Governance Zones, and the Diamond Development Initiative.

9. Corruption - This final section is simply a restatement of commitment, referring to existing initiatives, like the UN Convention against Corruption and the OECD Anti Bribery Convention.

The full document is downloadable from: http://www.g-8.de/Content/EN/Artikel/__g8-summit/anlagen/2007-06-07-gipfeldokument-wirtschaft-eng,property=publicationFile.pdf.

IN CONCLUSION

If this Declaration is anything to go by, the growth and globalisation debate at least seems to be getting more sophisticated, implicitly acknowledging that there is such a thing as growth and globalization that does not share its benefits fairly, and that issues like poverty and climate change are critical to long term economic prosperity.

My overall impression from the Heiligendamm Dialogue Process so far is that the battle to have CSR acknowledged as part of the social and environmental suite of solutions has been won, but the war to see CSR as a more holistic, embedded and strategic concept is in danger of being lost.

CSR in Developing Countries: Distinctive Characteristics*

Developing countries provide a socio-economic and cultural context for CSR which is, in many ways, different from developed countries.

In particular, CSR in developing countries has the following distinctive characteristics:

·         CSR tends to be less formalised or institutionalised in terms of the CSR benchmarks commonly used in developed countries, i.e. CSR codes, standards, management systems and reports.

·         Where formal CSR is practiced, this is usually by large, high profile national and multinational companies, especially those with recognised international brands or those aspiring to global status.

·         Formal CSR codes, standards and guidelines that are most applicable to developing countries tend to be issue specific (e.g. fair trade, supply chain, HIV/Aids) or sector-led, (e.g. agriculture, textiles, mining).

·         In developing countries, CSR is most commonly associated with philanthropy or charity, i.e. through corporate social investment in education, health, sports development, the environment and other community services.

·         Making an economic contribution is often seen as the most important and effective way for business to make a social impact, i.e. through investment, job creation, taxes, and technology transfer.

·         Business often finds itself engaged in the provision of social services that would be seen as government’s responsibility in developed countries, e.g. investment in infrastructure, schools, hospitals and housing.

·         The issues being prioritised under the CSR banner are often different in developing countries, e.g. tackling HIV/Aids, improving working conditions, provision of basic services, supply chain integrity and poverty alleviation.

·         Many of the CSR issues in developing countries present themselves as dilemmas or trade-offs, e.g. development versus environment, job creation versus higher labour standards, strategic philanthropy versus political governance.

·         The spirit and practice of CSR is often strongly resonant with traditional communitarian values and religious concepts in developing countries, e.g. African humanism (ubuntu) in South Africa, coexistence (kyosei) in Japan and harmonious society (xiaokang) in China.

* Extracted and adapted from Wayne Visser's entry on developing countries in "The A to Z of Corporate Social Responsibility"

Faith, Hope and Responsibility?*

    

This week, I conducted an interview with Paul Ehrlich, author of the controversial 1968 book, The Population bomb. And yesterday, I was reviewing an interview I did a few weeks ago with Bjorn Lomborg, author of the equally controversial 2001 book, The Skeptical Environmentalist. 

Both are packed with facts. Both are based on science. But they couldn't be more different in the conclusions they reach about the fate of the world. Ehrlich is all doom and gloom, while Lomborg is more of an optimist. Ehrlich is filled with despair, Lomborg is full of hope.

This battle of contradictions is not unique to these two authors either. Many of the thought-leaders that I have interviewed over the past months, including Nobel Prize winners, are similarly dispersed along the spectrum of hope.

 

So who is right? In the end, I am coming to realise, that is the wrong question. In their own way, following their own logic, they are all right. A more useful question is, what is effect of hope versus despair - on our response to the world, and on our personal wellbeing?

This is where I find the work of psychiatrist Victor Frankl, survivor of four Nazi concentration camps and author of Man's Search for Meaning, quite helpful. He shows that an attitude of hope is the one thing that enables humans to endure suffering and lead fulfilling lives.

Without hope, we lose our faith in life. And without a belief that we can make things better, we become disempowered, rendered ineffective in the world. Without hope, we die, if not physically, then mentally and emotionally. Hope is an attitude of effectiveness and a source of energy.

So in my mind, hope is a necessity. I am not advocating blinkered denial or blind faith. On the contrary, the more we are aware of the challenges, the more we are able to find a way to respond positively. But there is a danger that we get caught in the mire of the problems.

Reality is what we focus on, so it helps if we focus more on the solutions. There is always something constructive we can do, even if it is just by changing our attitude. And it is in our response - and that of others - that we find cause for hope. To hope is our greatest responsibility.

*(postscript: Thanks to Roberto Salazar for the title of this blog entry)

Financial crisis: Beyond reasonable greed?

"Greed is good". Remember the phrase immortalised by Michael Douglas who played Gordon Gekko in the 1987 movie Wall Street? Well, the world has more than lived up to these words by pursuing the principle that excessive greed is even better.

This was the opening gambit for my first book, entitled "Beyond Reasonable Greed", co-authored with Clem Sunter and published in 2002. Now, watching the financial crisis snowball over the past few weeks, I can't help feeling a sense of deja vu. Here are some extracts, which seem even more relevant today than they were when we published the book in the wake of Enron's crash:

"Bad magic has moved many companies into a state that is beyond reasonable greed. And the public have a good idea of the boundary between ‘reasonable’ and ‘obscene’. For example, we have had several disclosures on the size of individual packages and the terms of share incentive schemes which have caused tremendous hue and cry. They have been clearly out of wack with the norm. To give companies the benefit of the doubt, they may not have consciously exceeded the limits of reasonableness. Their boards probably comprise the normal spectrum of saints and sinners; but somehow they have allowed themselves to be collectively swept along by the prevailing paradigm of success which is purely financial, and that in turn has led to unreasonable behaviour.

We are reminded of the African tale of the Earth Mother placing a fig tree into the care of a troupe of monkeys. However, the monkeys not only ate the fruit, they stripped the bark and broke off the branches as well. In other words, they went beyond reasonable greed. When the Earth Mother returned, the fig tree had withered and died and the skeletons of the monkeys lay scattered on the ground. 

As the title of our book suggests, we do not expect humankind to dispense entirely with its selfish side. We will always want some measure of success in material and spiritual terms for ourselves and our families. But when an individual, a family, a clan or a nation pursues its self-interest to the point of unreasonable greed, the whole system risks collapse. We all have heard of the American dream: the idea that anybody can become a ‘somebody’ in the land of freedom and opportunity. That dream will end in tatters if it doesn’t become more universally applicable – to anybody anywhere in the world.

Bluntly put, we are seeking a Reformation in business along the same lines as the one precipitated by Martin Luther in 1517. On October 31 of that year, he wrote an attack on the sale of indulgences (remissions of punishment for sin) in 95 theses which he nailed to a church door.  His basic point was that the Church had become too interested in enriching itself at the expense of its true mission of providing spiritual leadership. It had lost the support of the population at large with its mercenary practices and obsession with grandeur and wealth.

In exactly the same way, the modern corporate world has lost the confidence of the person in the street. The high priests of business – the board of directors – are perceived as just another example of a group of privileged people driven by unreasonable greed and feathering their own nests. The customers and shareholders come a poor second and other stakeholders trail even further behind. The modern equivalent of indulgences is an astronomical salary, a large wad of share options and a corporate jet. And the modern equivalent of the flowery and unintelligible prayers which the Church used to recite in order to extract its indulgences from the peasantry is the purple prose and lofty sentiments expressed by companies in their mission statement, combined with a set of accounts that only the initiated can understand.

Eventually, we hope to persuade you to join us in starting a chain reaction where one day the international community will say: it’s a miracle how business has turned its back on unreasonable greed. Mahatma Gandhi summed up our message better than we can: “The Earth has enough for everyone’s need but not for everyone’s greed”.

New book: Making a Difference

In the face of unprecedented global challenges like poverty and climate change, can individuals make a difference? 

This book reveals what motivates people to devote their time and energies to addressing social, environmental and ethical issues. 

Based on in-depth research among corporate sustainability and responsibility (CSR) professionals, it shows the pivotal role of values, inspiration, expertise, empowerment, strategic thinking and social contribution among "purpose-inspired leaders". 

Using extensive illustrative quotations, different types of CSR change agents are identified, including experts, facilitators, catalysts and activists. The implications for business of better understanding these CSR leaders is explored, as well as the opportunities for future academic research. 

The book concludes with a call to personal action by making a positive difference and leaving a meaningful legacy.

Amazon link:

http://www.amazon.com/Making-Difference-Wayne-Visser/dp/3639071883/ref=sr_1_8?ie=UTF8&s=books&qid=1223680541&sr=1-8

Guest column: Crane & Matten on CSR and the financial crisis

CSR Professors Andrew Crane and Dirk Matten of Schulich Business School, who I've been spending some time with this week, have been tracking the implications of the financial crisis on their blog (http://craneandmatten.blogspot.com) for a few weeks now. Here is one recent entry:

"As the turmoil in financial markets continues unabated, some of those in the responsible business arena are considering what the likely effects of all this are going to be on the practice of CSR. The last decade or so has seen a seemingly unstoppable rise in interest, attention, and action on CSR issues, at least from some quarters of the business community. But with recession around the corner (or apparently already arriving for some countries), what is the prognosis for responsible business when times are haOut here in the blogosphere a range of opinions are circulating. One post that has gotten quite a lot of attention came from Adam Jones of the Financial Times, who was among the first to raise the issue, and ended up somewhat hedging his bets:

"I suspect there are lots of Milton Friedman-reading managers in the private sector who grumblingly tolerated CSR programmes during the boom and would now love to get rid of them on similar cost grounds. Instead of throwing the money changers out of the temple, it would be a case of throwing the CSR priests out of the marketplace. But that would be a pretty dumb move at a time when the public mood is for more accountability and regulation, not less."

Reenita Malhotra, writing on her "Inspired Economist" blog, focused on the specific effects on CSR in the investment banking industry, arguing that such enterprises should be protected exactly because of their positive social benefits:

"A high return on investment has enabled many of the investment banks to show a solid to commitment to corporate social responsibility in the last few years"

Taking an opposite point of view, Nic Paton at the online resource Management-Issues suggested that a lack of attention to genuine CSR was actually to blame for the crisis in the first place:

"While many companies believed they were engaging in corporate social responsibility, they were in fact missing the point. Truly responsible business, rather than chasing a fast buck and in the process taking overly dangerous risks, would have considered the interests of all those who had a stake in their business."

Finally, Mallen Baker, writing for Business Respect, has taken a similar line, but has also sought to move the debate forward by looking at what this should mean for practicing CSR in the future

"Bear Stearns produced no CSR report of any sort. Lehman Brothers did not produce a CSR report, but they produced a philanthropy report. Even if they had gone further, it seems unlikely that the complex nature of how they created wealth would have been a feature. Now it needs to change. If anything is to come out of this, it has to be that corporate social responsibility once and for all leaves behind the philanthropy tag, and we see clear focus on two areas:

• How we create a different ownership structure for businesses where responsibility for consequences is a more real feature of share ownership.
  
• That the oversight and accountability demanded of companies now goes into the detail of how they make their money - and what are the consequences of their actions.

Two months ago, such concepts were unthinkable. Now they are essential."

Pretty profound stuff. But the prognosis for CSR is, as far as we can see, far from clear. Changing ownership structures for businesses seems a long way off, unless by this Baker means the movement into public ownership of banking institutions in the UK, US, Iceland and elsewhere. But somehow we doubt that's what he is getting at.

So, really, it's probably too soon to say for sure what will happen next on the rocky road of CSR. But hopefully our poll at the top of the page will give some indication of where our readers think it should be heading....