Thursday, 30 August 2012

Part 3 - CSR who owns it and what should it achieve?

On to part 3 blogging about CSR, I have tried to examine who has ownership and why, if this is effective or indeed a tool yet to realise its full potential. I have made some comparisons in the context of different capitalist models (Liberal v State), to see what differences emerge.

On this last leg I want to cover more ground on what CSR means to people, the state and corporations and what it might achieve depending upon where ownership lies. It is also worth exploring an extended version (or future direction) for CSR and where this might take us.

Under the current liberal model it is predominantly the larger corporations that practice CSR, using it as means to promote green credentials outwardly and exercising control over their supply chain inwardly. The whole process can be quite complex and therefore, quite hard to monitor and evaluate. There can be little doubt that some large corporations are taking their obligations seriously and making improvements to their efforts on sustainability. This kicks on down the supply chain, which can multiply the positive  i,pacts, however this system is not without its problems.

Firstly, whilst reporting can be put in one place the systems for monitoring are many and varied, ranging from statutory controls (permits for example) through voluntary accreditation schemes (i.e. sustainable forestry) and also internal management systems (again with varying levels of accreditation).

Statutory compliance is generally good (which says something about effective regulation) and is usually the most active part of any internal management system. It is also true however, that large corporations will use the existence of their own internal systems to lobby against further tightening of regulation and to seek to get dispensation with regulators. This may seem reasonable on the face of it, however there is compelling evidence that many internal management systems are not as robust as they are thought to be and accidents and non-compliance can be similar to sites that don't have such systems. Is this compatible with the objectives of CSR then, or would it be more ethical to continue to be inspected at greater frequency, to help build even greater resilience into internal systems?

Voluntary schemes suffer even greater vulnerabilities and cover various aspects of a number of supply chains. Large corporations are willing to join voluntary schemes (such as sustainably sourced timer, CDM and Fair Trade), however these supply chains span the globe. It has proven very difficult to monitor the performance of these schemes and often the operators of the scheme do not have the capacity to monitor or fully implement. NGO's have investigated some supply chains and found them to be lacking in terms of regulation and auditing leading to, for instance. corruption and fraud within the system (hardwood logging), or unsustainable projects being certified (as has happened with CDM).

Whilst failures of this nature cannot be placed directly at the door of the large corporations, the ethical question around ownership of CSR remains. There is a basic paradox between corporations signed up to CSR making promises (or setting targets) and costs to shareholders of delivering these as obligations within a liberalised market. Many reported 'successes' are genuine triple bottom line gains, however these gains may often be offset by displacement or growth to other product ranges, which may not be measured and reported.

By way of a case study to demonstrate the paradox, take the energy industry. It is becoming more evident that investment in renewable energy technologies is both sustainable and sound, however the scale of the industry creates an impasse in moving towards more sustainable options. The UK estimates that investment of £200bn will be required over the next decade to upgrade energy infrastructure, however this is based on the presumption of a continued heavy reliance upon the National Grid and gas generation. This is not the most sustainable option and therefore, flies in the face of CSR objectives, as a more decentralised supply base with less reliance on the grid and gas would be a much more sustainable option and would encourage greater (and more diverse) renewable generation closer to point of demand, which in turn should significantly reduce transmission losses and create more jobs. This situation is echoed in the US and other countries.

Without the investment we face power cuts and outages, however it seems that investors are only willing to support investment in large energy companies and the grid model. Could this be because tax payers money is still being used to support fossil fuel and nuclear energy companies, something that is surely unacceptable under CSR?

So what about CSR within a state capitalist model? The level of direct intervention is key here! If a government is operating a company on behalf of the state (and therefore the general population) the obligations of that company should reflect very closely the mandate of that government in respect to all issues of sustainability. Nevertheless, this could still be carried out merely as a box ticking exercise, or more positively, the company could be a flagship where policy can actually be formulated, researched and tested. This might be relatively easy on a state owned railway (as they are very efficient in terms of CO2) and are a relatively safe means of transport, however this might become more difficult if you are operating a nationalised oil company!

If policy is correct, then it should be easier within this model to raise investment for the most sustainable option (Chinese solar expansion is a good example), dependent upon the level of private money that might be sought (as most large infrastructure models work this way) and their willingness to participate (a problem UK and France have encountered with nuclear generation ambitions).

This all brings us back very nicely to the central question(s) about CSR and about who should operate it and how. Could CSR actually be a tool for transition to a more socialist model (as predicted by Marx) at one extreme, or will it just be a badge for large corporations to polish that will have little meaning or impact to the man and woman on the street?

For so long as we operate within a liberalised market, it is a given that the shareholder will be king! It is imperative therefore, that CSR becomes a priority with the board and of the shareholders. I believe that this is starting to happen, with a number of ethical investment options emerging and a number of blue chip companies trading on green credentials. It is important to recognise however, that the whole edifice only stands, so long as the foundations are solid, something which is not completely proven as yet. Failures will undermine confidence and devalue CSR, therefore it is important to ensure robust monitoring and regulation to uphold these values.

Central to making CSR a driver for change and investment within the liberal capital context, is the education of shareholders and investors alike, to recognise true sustainability and to have faith in the science and research that underpins it. I think there is a long way to go here yet as  shareholders and CEO's alike, have to be able to differentiate between short term variations  (in markets, economies etc.) and the longer term objectives required by CSR. This has been witnessed recently with the economic downturn and the growth at all costs mentality seen in governments let alone individual companies! If it were sustainable before and added to the triple bottom line, then the same holds true now!

Within the state capitalism model CSR has the potential to be more joined up with national policy and as a result may have more credibility with people. If large state owned companies are seen to be driving the CSR agenda forward, this will impact across the whole supply chain and can be a major component in delivering policy and meeting obligations. In a reverse of the liberal model state owned companies can be used themselves as examples of good practice and can educate at the same time.

It will also offer people a direct means by which people can measure the degree of success of  implementation of green policies through the performance reporting of state industries and allow them to align their thinking with sustainability issues.

As we move forward there is a greater degree than ever before of economic uncertainty, there is also the spectre of looming resource shortages and the impacts of climate change to factor in. Actively seeking to make CSR work can tell us more about how our largest companies perform in these respects, I see it at the very least as a means to communicate with large corporations about their efforts to reduce impacts.  The more people that understand and use CSR as a means to judge ethical performance and link it to buying habits and choices the more effective it will become.

In conclusion I would say that CSR ownership needs to be with all of us and that it can only be effective where there is a wide understanding of the objectives, such that we can ask the right questions. The underpinning mechanisms are very complex, especially for the liberal model, making proper audit and regulation difficult, however this is essential to credibility.

The liberal and state models operate in different ways, however the state model may offer a little more in terms of connectivity with the end user and feedback through to political agenda setting.

It may of course all become quickly irrelevant, if as predicted, the current model succumbs to the pressures of population growth, resource depletion and climate change!

Hope you enjoyed the diatribe, please feel free to add any comments and look out for new topics!

Tuesday, 21 August 2012

Liberal v state capitalism and how CSR performs.

Continuing on a theme from the last post, I'm trying to explore where CSR sits within the two competing models of capitalism. The first blog looked at the main differences and laid out some of the areas to explore. This blog intends to look at the pros and cons of the two models, to help identify where CSR sits and to see if its impacts or purpose may differ.

In order to tie these together, I have copied  a chart below showing major state and private operations around the World and the share of Nat v state listed companies.

Ref: Economist.

Tabulated below are some thoughts on pros and cons for liberal and state capital enterprises, it is not exhaustive, but is there to provoke thought and provide a basis for some analysis about the perception and function of CSR within these regimes.

Some examples are given to illustrate points, however it must be taken into account that in reality there are a number states that operate varying degrees of state capitalism and some operate constraints to the extend that a market isn't fully liberalised, so there is a total spectrum of possibilities.

Topic area
Liberal capitalism
State capitalism
Business type.
Performs well with start up and innovation, more freedom to find investment. Suited to consumer goods hi tech etc.
More suited to large infrastructure projects, can align investment to seed national priority industries (I.e. utilities, transport etc.). Service industries may also be suited, including elements of finance and banking (especially as you tend toward a more socialist model.
Decision making more streamlined, especially for smaller companies, policy more focused and less external influence/interference. Larger enterprises can become bureaucratic and may face other difficulties where there might be a mismatch with state policy (rail v air).
Generally larger enterprises, more bureaucracy and probability of external influence. This can hinder development and productivity, but could also provide a more direct route for state support.
General economic impact
Exists to provide a return to shareholders, job and wealth creation, pays taxes to state.
For as many shades of capitalism as there are, it is quite possible that private companies may receive state aid and conversely avoid full tax obligations in the states in which they are based.
Quite often receive large state aid as a consequence of strategic positioning, however there is often scope to use consultants/specialist to enhance areas of performance.
Usually large employers that can provide benefits of employment stability as well as a return to the state when operating efficiently within a market.
General social benefits
Blue chip companies always bring kudos with them and the possibilities of spin off business and partnerships. The flip side of this however, is that they can relocate (maybe for lower corporation tax or workforce skills). Larger enterprises often bring growth or stability to the areas they occupy and will willingly volunteer to fund or participate in community projects, however their allegiance is still to their shareholders and often there are conflicts with communities over planning issues for instance.
State enterprises by contrast can be seen as being a bit moribund and may occupy more run down areas, however this image is changing.
New state projects are now seen as flagship enterprises and are used to demonstrate high standards in environment and social practice (although it would be easy to say that this can be engineered through planning to some extent).
Nonetheless this is seen as a positive and can also allow for a more diverse (or self contained) enterprise) through, for instance the provision of training academies and health care services.
Knowledge transfer/success rate
Large corporations often have to compromise in terms of selling knowledge in order to gain access to markets or to gain access to large government contracts. This enables a state to play catch up at a fast pace as well as much reduced development costs.
Private companies are also vulnerable to buy out by state enterprises, enabling them to access technology and skills that can be quickly replicated and used.
State enterprise has not always been able to benefit from venture capital in the same way as private enterprise, leading to a poor conversion rate from innovation into realty.
State links with universities is generally strong, although in the US corporate sponsorship is advanced within their system. The weak link has always been access to analysis and well targeted venture capital.
Different methods have been used to overcome this from tweaking how states fund universities (as in the UK) to building complete cities designed to showcase and encourage research and innovation as in China.
I hope that this represents a fair reflection of the status of the two models and their strengths and weaknesses. I would like to take the information so far and analyse this in the context of CSR, leading to some conclusions and, quite likely, some more questions!
For the next blog.

Friday, 17 August 2012

Who should own CSR and how does capitalism serve this?

I suspect that this topic will roll over into a series of posts, as there are a number of topic areas to discuss and related issues that are important in their own right.

I want to explore whether or not the current economic model has reached the end of shelf life and if it is or should still be relevant to humanist and social justice objectives.  Where should ownership of CSR lie and who are the best arbiters?

So first up, it is perhaps good to look at current alternatives, to try to establish if they can deliver better democratic accountability (and hence, social responsibility) from capitalist activity. To this end I want to examine how liberal capitalism performs against state capitalism as a reasonable first step for comparison.

I would readily accept that there is no absolute in this, more a number of shades of grey that relate to the starting point for any given economy (are moving from totalitarian control or looking to re nationalise?). China and Russia would seem to be the most obvious examples, however other Asian countries and Brazil could also lay claim to operating a competitive state capitalism. There are a number of pros and cons to discuss, however for me the bottom line is not shareholder return alone, its more about well being and contribution that is made to sustainable living.

Marx defined capitalism as a step in our history where, capitalism once progressive will stagnate and fail due to increasing inequality and the contradictions that this produces (is this being evidenced now?). Thus it may be reasonable to ask if operators of state capitalism are cutting out that phase of economic evolution and following a progressive agenda, as opposed to the view that they are moving towards a more conventional capitalist model.

Well there's an opening gambit, I will look at pros and cons next and hope you find it of interest and continue to follow (please feel free to comment too!).

Monday, 6 August 2012

People power as a destructive force.

People power is often seen as a positive use of our freedom of choice to demonstrate solidarity and underpin the cause of social justice. In this instance I refer to the power of a vast global population to change the balance of resource and climate to the point where we risk (or reach species extinction.

Serious stuff, but I hear muttering that it wont happen just yet, why should I bother right now? Well perhaps our grisly destiny is peering at out at us from behind the curtains of our collective denial, perhaps it is really only just around the corner!

Thresholds (and supportive capacity), the maths of exponential growth mean that even our best models are always likely to be a reactive scenario rather than a projection. It will place us in jeopardy to only think in straight lines.

Enter a computational research scientist by the name of Stephen Emmott who has created a sublime piece of theatre, based upon the science of overpopulation and backed by his huge capacity for handling research in computational science. He takes the audience through the facts and figures in a precise and informal way, describing himself as a rational pessimist, based upon the probability that we cannot cope with the level of change required to be optimistic in any rational way. The play is called 10 Billion and the run is sold out, but I hope more people do get to see it.

A more comprehensive critique can be found here:
I would recommend a read.

As if to prove the point about rational pessimism, I would like to share an example of irrational optimism, that is, that by using fewer plastic bags we shall in some way do so much good. Life cycle figures for various bags are fairly inconclusive, you would have to use a hemp bag a good number of times for it outperform  a plastic carrier. Most people re-use their plastic carriers for various things, thus rendering them more sustainable than some other options.

On the issue of plastic waste fouling the land and oceans, yes it is a problem, but is just one of production and use or our behaviours, handling and duty of care that are more important?

I'm sure you will find this article informative and amusing on the subject:

So, to conclude this chapter, I would ask that everyone should think (deeply if you like) about the true benefits of many campaigns (given that it is possible to carry on only a limited number) in relation to their over distraction from more important issues, you know the ones, the sort politicians are really scared to tackle! That;s where people power truly belongs.