Making the case for and against and beyond Friedman in 2020

On the anniversary of Friedman’s “The Social Responsibility of Business Is to Increase Its Profits”

By Steen Vallentin

September 13th marked the 50th anniversary of the publication of Milton Friedman’s famous New York Time Magazine essay entitled “The Social Responsibility of Business Is to Increase Its Profits”. This has occasioned a slew of testimonials and opinion pieces on Friedman’s legacy in general and the legacy of this free market manifesto in particular. 

Not surprisingly, the tone of testimonials have differed. From those lamenting Friedman’s enormous influence on the discipline of economics, economic policy, modern business and finance over the last three to four decades in particular, to those celebrating these very same developments. One commentator, in The New York Times, speaks of how a generation of C.E.O.s have been brainwashed to believe that the only businesses of business is business. That the sole responsibility of business is to make money. 

Dwindling relevance

Anti-Friedman sentiment, and this is nothing new, takes aim at the single-mindedness and moral blind spots of free market capitalism, market fundamentalism, the shareholder paradigm, finance capitalism, you name it.

Indeed, ‘Friedman was wrong’ was for many years a recurrent theme in arguments made in support of CSR and stakeholder capitalism. But Friedman is not as relevant as he used to be.

In recent years, as far as specialized discussions of CSR go, the Friedman doctrine has increasingly been displaced by ‘the Porter doctrine’, that is, the strategic view of business responsibilities promoted by renowned, now retired, Harvard Business School professor Michael Porter along with Mark Kramer.

Porter & Kramer’s more accommodating brand of economic instrumentalism – encapsulated in the influential notion of Creating Shared Value (CSV) – has turned out to be much better attuned to present circumstances than the message of Friedman’s antagonistic and polarizing opinion piece.

The critique of free market capitalism has arguably gained urgency and currency with the climate crisis and calls for sustainable development and green transition. This is not to say that the Friedman doctrine has been abandoned by all those who used to support it.

However, given the opportunity to reflect, supporters of Friedman tend not to dwell much on the minutiae of the 1970 essay.

The devil is in the detail, and few seem to be willing to argue that what Friedman wrote 50 years ago is a proper representation of how the problem of corporate social responsibility is constituted in the year 2020.

The strength of Friedman’s wonkish essay was always its crude simplicity. For many years it seemed to encapsulate everything that needed to be said about CSR – according to mainstream economists and ideologues of a similar persuasion and the discipline of neoclassical economics. In other words, very little needed to be said. 3000 words were enough.  

However, with the rise of ESG and sustainable finance it seems to be dawning even on the disciplines of economics and finance that more indeed needs to be said – and that the crudeness of Friedman falls terribly short in capturing the challenges, risks and opportunities ahead.

Friedman’s article has served as a moral cornerstone for the shareholder value paradigm. Its moral shortcomings are increasingly showing, though.

The Friedman doctrine nonetheless

What supporters of the Friedman doctrine nevertheless argue, is that he was (and is) right about fundamentals: that the shareholder value paradigm is a superior economic principle and form of governance. The argumentative support structure for this paradigm does, however, need adjustment in order to achieve better alignment with changing historical conditions, opinion climates, societal norms and expectations.

In other words, supporters of shareholder capitalism need to fight for their cause. They need to renew their engagement in the ongoing ‘battle of ideas’ over business and society.

Their main opponent in this battle is well-known, but has been gaining new and more widespread support as of late. The opponent is stakeholder capitalism, the virtues of which have found high-level affirmation recently in the Davos Manifesto of 2020 and in the Business Roundtable statement on the purpose of business from 2019. 

Importantly, the American brands of stakeholder and shareholder capitalism have a common denominator. Both Friedman and R. Edward Freeman (the great popularizer of stakeholder thinking) have described themselves as libertarians. Stakeholder capitalism, US-style, begins and ends with voluntary initiatives and stakeholder engagement by business. Government and regulation are not supposed to have central roles to play in such endeavors. They are supposed to work better, more smoothly and efficiently without government interference. 

Thus, the first line of battle – for Friedman supporters – has to do with regulatory failure. Sure, there are market failures that we need to take account of when assessing the responsibilities of business. But regulatory failure should be no less of a concern. 

The second line of battle has to do with principles and practices of governance. According to its supporters:

Stakeholder capitalism is supposed to be more open, democratic, responsive and responsible than its counterpart. But what does stakeholder governance mean in practice, at the corporate level, unchecked by government regulation and without agreed upon rules of engagement? It is far from clear. 

Will it ultimately be good for business and society if companies are governed in accordance with the diffuse model and principles of ‘stakeholderism’? It is equally well imaginable that stakeholder capitalism can turn out to create less value for the stakeholders whose interests it is supposed to reflect and serve, and that stakeholders will ultimately be worse off if this is the direction the development of the economy takes. And it may be that shareholder capitalism, with its more clearly defined purpose and governance principles, is ultimately better equipped to keep business leaders on their toes and create value not only for shareholders but for stakeholders at large. So the argument goes in conservative circles.

Ideology and the ongoing ‘battle of ideas’ over business and society

While many of these arguments seem to fly in the face of public opinion of the more progressive kind, we must acknowledge how, in a polarized opinion climate, public opinion is divided on many political topics. Andrew Hoffman (2012) speaks of how the climate change debate in the US has become enmeshed in the so-called ‘culture wars’. Acceptance of the scientific consensus regarding climate change is now seen as an alignment with liberal views consistent with other cultural issues that divide the country (i.e., abortion, gun control, health care, and evolution). This tendency has only worsened under the Trump presidency.

On top of this we can observe how sustainable development and green transition are evolving as government-driven agendas, involving a high level of social and economic planning – not to mention the COVID-19 crisis and how the pandemic, for better or worse, has provided a large-scale affirmation of the primacy of government intervention in dealing with grand societal issues.

Under these conditions it has once again become relevant to speak not only of broader socialist tendencies in politics and society, but also of how CSR/corporate sustainability can be a Trojan horse or slippery slope leading from market capitalism into a new socialist order. In other words, the ideological underpinnings of the CSR debate are once again becoming more apparent.

This calls for more in-depth studies of the ideological commitments sustaining the theory and practice of CSR. It does not necessarily call for rejuvenation and regurgitation of Friedman’s short essay, though. Friedman is not as relevant as he used to be in discussions of CSR. The anniversary has done nothing to change this.

We need to look beyond Friedman and see him (only) as one part of the larger ideological tapestry. We need contextualized, updated engagements, not more flogging of a somewhat dead horse.


References

Hoffman, A.J. (2012). Climate science as Culture War. Ross School of Business Working Paper No. 1361, June 2012 / Stanford Social Innovation Review, 10 (4).


About the Author

Steen Vallentin is Director of the CBS Sustainability Centre and Associate Professor in the Department of Management, Society and Communication at Copenhagen Business School. His research is centred on CSR (corporate social responsibility) and sustainable development in a broad sense.

Is Tourism an Essential Industry?

Can it really be true that we don’t need to travel?

By Elizabeth Cooper

The COVID-19 pandemic has dramatically highlighted those workers and industries which we rely on in a time of crisis such as this – and those which we don’t. In a world in which doctors and nurses work extended hours to ensure our vulnerable citizens get the best possible care, workers in the food service industry expose themselves daily to give us access to food, and epidemiologists compete to break new medical ground with a reliable vaccine, the tourism industry has, understandably, taken a back seat. But as we desperately envision a post-pandemic utopia in which we will have supposedly learned from the lessons of the pandemic – can it really be true that we don’t need to travel? 

How do we define an essential industry?

So what actually is an “essential” industry? According to the Cambridge English dictionary, an essential industry is “an industry that is considered necessary for a nation’s economy”. Knoema.com has a neat map showing the percentage of national GDP made up by tourism for (almost) all countries of the world, and the figures vary greatly, as might be expected. On a global scale, tourism in 2019 was reported to account for 10.3% of global GDP, and 1 in 10 jobs around the world. Although there are no official numbers on exactly what percentage of GDP qualifies an industry as essential, 10% is surely significant. 

Source: lectrr.be

In a rather provocative blog post in July this year, tourism academic Jim Butcher argued against the ‘degrowth’ of the tourism industry – a movement that many propagators of the ‘new normal’ rhetoric have been calling for. He emphasised the impact of tourism standstill specifically on low-income citizens, who are more likely to work in the industry. Butcher writes:

The lesson of COVID-19 is surely that “undertourism” is a far, far bigger problem [than overtourism]. From Margate to Marrakech, Miami to Massawa, the poor are hit hardest. The UN has predicted that COVID-19, or the response to it, could lead to hundreds of millions of people becoming impoverished.

As wealthy, Western tourists, we travel in our leisure time, with our ample disposable income and our agreeably emblazoned passports. To be a tourist is certainly a privilege that is not available to everyone. From this perspective, tourism is a luxury and is non-essential. But from the perspective of those who rely on tourism’s low-paying service jobs to feed their families, it is absolutely essential.

Is tourism just an industry?

Part of the reason for this misalignment in perspectives is the framing of tourism as an industry and only that. If tourism is nothing more than an industry, then a tourist is a simple consumer, who consumes a destination. The negative connotations of this (not to mention the mental image!) are almost too much to bear.

All industries are essentially about people, but tourism perhaps more so than most, since many of its products themselves are encounters between people of different cultures.

Tourism, therefore, is much more than an industry – it is a social process with a plethora of complex implications. And contrary to the beliefs of many, a lot of these implications are positive. A good example is the wildlife tourism sector, where there are numerous cases in which the conservation of a destination relies heavily on philanthropic donations by tourists (Powell & Ham, 2008Ardoin et al., 2016).

On a more general level, tourism fosters understanding and awareness, and a world (permanently) without travel is arguably an even scarier prospect than the instability we are living in today. Few articulate this argument more powerfully than Taleb Rifai, former Secretary-General of the UNWTO.

He argues that the reason we care so much today about the negative impacts of tourism is because we are more aware than ever before – and that we should be grateful for this heightened consciousness. It is largely international travel itself that has enabled this increased awareness – nowadays, it is easier than ever before to have real connections with other cultures. And real connections create genuine concern. Rifai argues that this should be seen as progress, and that ceasing to travel would be counterproductive. Here, he’s talking in the wake of recent terror attacks in 2016, but the sentiment is valid today:

It’s very important for us never, ever to allow these forces of darkness to win the battle. That’s exactly what they want us to do. They want us to stop traveling. They want us to build walls, they want us to close borders, want to isolate us from each other and they want us to hate each other. That’s why they’re targeting tourism.

The notion of degrowth supported by ‘new-normalists’ can be realised in ways which still create value for economies that rely on tourism. Tourists can travel less frequently and less far and still provide increased value for destinations. Fewer tourists who create more value for destinations is the kind of regrowth we should aim for.

The argument for tourism being not just an essential industry, but also essential to society, is perhaps best expressed by a quote that is attributed to Mahatma Gandhi (and which also happens to be a strong candidate for my next tattoo): 

“Travel is the language of peace.”


References

Ardoin, N.M., Wheaton, M., Hunt, C.A., Schuh, J.S. and Durham, W.H., 2016. Post-trip philanthropic intentions of nature-based tourists in Galapagos. Journal of Ecotourism, 15(1), pp.21-35.

Powell, R.B. and Ham, S.H., 2008. Can ecotourism interpretation really lead to pro-conservation knowledge, attitudes and behaviour? Evidence from the Galapagos Islands. Journal of sustainable tourism, 16(4), pp.467-489.


About the Author

Elizabeth Cooper is a PhD Fellow at Copenhagen Business School, within the Department of Management, Society and Communication. Her research aims to link the fields of behavioural science and tourism, by experimenting with strategies to ‘nudge’ cruise tourists into behaving in more sustainable ways, specifically in the ports of Greenland.


Photo by KaLisa Veer on Unsplash

Private Standard-setting Organizations and the Theory of Change

Theory of Change – Evaluating Supply Chain Outcomes

By Kamilla Hvid Andersen, Eileen Ryll, Dr. Caleb Gallemore and Dr. Kristjan Jespersen

Due to globalization, supply chains are becoming increasingly complex, challenging national governments’ regulatory capacity, or, perhaps, political will. Amid these “governance gaps” some private-sector organizations have begun setting voluntary standards promoting sustainable production practices. As they are not backed with legal force, private standards must demonstrate both positive impacts, credibility and inclusive decision-making to be perceived as legitimate in the eyes of external observers and member firms. Due to the complex and interrelated nature of sustainability issues, it can, however, be difficult to relate outcomes back to activities of the standard setting system.

To monitor their programs and evaluate their impact, many standard-setting organizations have adopted a Theory of Change (ToC).

Based on Carol Weiss’s theory-based evaluation approach, a ToC is a cause-and-effect illustration that makes explicit often implicit beliefs and assumptions about how different actions should generate impacts.

Evaluating impacts then requires collecting data that show how the proposed causal sequence plays out and, if discontinued, where it broke down. On this account, the ToC is necessary because practitioners often rely on tacit knowledge or even guesswork, rarely articulating the conceptual foundations of their actions explicitly.

ISEAL – The Standard for Standards

The ISEAL Alliance has been a key ToC promoter for many major sustainability standards. The organization is in essence a benchmarker for certification systems, working to disseminate better practices across sustainability standards. While the organization has a relatively small membership, its members include prominent standards like the Roundtable on Sustainable Palm Oil (RSPO) and the Forest Stewardship Council (FSC). Its Impact Code strongly encourages, though does not require, a ToC as the foundation for robust Monitoring & Evaluation (M&E).

While couched in an M&E framework, ISEALs’ framing of a ToC as a way to articulate building blocks for long-term goals also links it to strategic planning.  For the organization, a ToC is both product and process. As a product it maps out what to measure to assess a standard’s impact. As a process, it can help define a shared vision of how the standard should be making change, helping get member and observer buy-in on its strategic trajectory.

Case in Point – RSPO

The RSPO is a good example of how ToC procedures can influence organizational operations. Following ISEAL recommendations, the RSPO constructed an elaborate ToC in 2017. While its stated primary goal of making sustainable palm oil the global norm has remained since the standard’s early days, the ToC outlines the strategies deemed necessary to achieve this vision. By explicating the assumptions behind its actions, the RSPO’s ToC is simultaneously an M&E tool and a strategy. Though, like ISEAL, the RSPO introduced the ToC as an impact evaluation tool, the process generated critical discussions on the organization’s shared vision and explicated previously implicit beliefs regarding what making sustainable palm oil the norm actually means and how it could be achieved.

Because ToCs have both M&E and strategic planning components, responsibility for their development and implementation should not reside solely in M&E departments. Rather, effective ToC processes should include the whole organization and external stakeholders, requiring strategic decision-making support. Continuous feedback from all actors implementing elements of the ToC into their daily work can be valuable to highlight shortcomings of the ToC in place and guide future strategy reviews.

The Mechanics of TOC

A ToC process includes two broad phases. In the first, relevant actors develop or refine a shared vision and outline causal sequences necessary to achieve it. In the second, actors must incorporate the ToC into day-to-day routines.

The ToC as it emerges from the first phase is an intermediate outcome, part of a continuous learning loop that can be influenced by other processes surrounding the organization. It also may trigger other processes, as was the case within the RSPO when the ToC heavily informed another strategy document outlining member responsibilities across the value chain. The division between these phases, of course, is blurry, and it is always possible to re-evaluate and re-model the intermediate ToC, making the process iterative. All this work goes far beyond simple M&E, a lesson the RSPO learned the hard way, at first significantly underestimating the effort necessary to develop its ToC, regarding is simply as mapping out what was already there.

The Role of Interactive Adaptivity in Supply Chains Evaluation

Based on the example of their use by ISEAL and the RSPO, ToCs can serve several purposes:

  • First, they can support strategic planning while structuring strategic reconsiderations over time. Their iterativity might make it particularly important for organizations to revisit their ToCs before strategic re-alignments or in times of upheaval.
  • Second, in a complex field that spans multiple stakeholder groups, which as is case with the RSPO, most likely have divergent underlying assumptions, the ToC process can help illuminate blind spots. To be effective, the ToC needs to be inclusive of as many of the actors affected by the organization’s activities as possible.
  • Third and more prosaically, a ToC, while more than impact evaluation, can support evaluative work, serving as the backbone for M&E activities.

About the Authors

Caleb Gallemore is an Assistant Professor in the International Affairs Program at Lafayette College. He holds a Ph.D. in Geography and within his teaching, he focuses on southeast Asia, global land use, sustainability, research methods and geographic information science.

Eileen Ryll graduated from CBS with a degree in MSc. Business, Language and Culture with a focus on Diversity and Change Management. She has previously studied Business and Cultural Studies in Germany and Sweden. Her main interests are organizational strategy and intercultural encounters. 

Kamilla Hvid Andersen studied her bachelor’s and master’s degree at Copenhagen Business School. In June 2020, she graduated from the MSc. in Business, Language and Culture with a specialization in Diversity and Change Management. Her personal interests include sustainability, intercultural communication, and organizational change. 

Kristjan Jespersen is an Assistant Professor at the Copenhagen Business School. He studies the growing development and management of Ecosystem Services in developing countries. Within the field, Kristjan focuses his attention on the institutional legitimacy of such initiatives and the overall compensation tools used to ensure compliance.


Photo by Jungwoo Hong on Unsplash

Normative foundations for stakeholder involvement in environmental and societal impact assessments

A complex issue of global relevance

By Karin Buhmann

This article is based on previously written piece for the Centre for Business and Development Studies. It focuses on the normative foundations, such as guidelines and legislation as well as some common features or practices for good stakeholder involvement in environmental and societal impact assessments. As a part of the blog-post series on Consultations, Public Participation and Meaningful Stakeholder Engagement, it considers various aspects of stakeholder involvement as an element in the planning and decision-making relating to renewable energy, mining, infrastructure etc.

These blog-posts disseminate preliminary results from project examining best practice in stakeholder engagement as part of impact assessment. The project partly builds on investigations and interviews in Greenland in August 2018 and Sápmi in June 2018. [Ref: NOS-HS project, ref. 2017-00061/NOS-HS, on Best practice for Impact Assessment of infrastructure projects in the Nordic Arctic: Popular participation and local needs, concerns and benefits, Principal Investigator: Karin Buhmann)].

Public requirements on consultations and corporate management of risk to society

Consultation of the public in the context of assessments of societal or environmental impacts is not only common but mandated by law in several countries. In many places mandatory environmental impact assessment goes back to the 1970s. Mandatory impact assessments of other issues, such as societal sustainability or human rights, is a more recent phenomenon that to an extent builds on experiences gained around environmental impact assessment.

Even when impact assessment is not mandatory, it may be wise for a company to reach out to the local community and other potentially or actually affected stakeholders in order to map societal risks. This may contribute to counteracting a loss of the corporate ‘social licence to operate’.

Recommendations on ’meaningful stakeholder engagement’ in societal impact assessments

It is a general expectation that companies conduct so-called ‘meaningful stakeholder engagement’ in order to identify potential or actual adverse impacts on, for example, the environment, labour conditions and human rights. This is a result of the OECD Guidelines for Multinational Enterprises – a detailed set of recommendations from OECD member states as well as several countries in Africa and Latin-America.

The recommendations target companies operating in or out of the relevant countries. Likewise, all companies (regardless of form and countries of registration or operation) engage meaningfully with affected stakeholders whose human rights are or may be harmed by a business activity, in order to understand and map the impact from the perspective of these affected.

The United Nations (UN) Guiding Principles for Business and Human Rights, which were a source for the 2011 update of the OECD Guidelines, refer to meaningful stakeholder engagement in this context. The objective is that the impact assessment will be conducted in a manner that takes account of the affected stakeholders’ perception of risks or actual harm caused, that is, adopting a bottom-up perspective.

The company is expected to prevent risks and actual harm that it causes or contributes to. It can only do so if it understands the problems from the perspective of those who experience or fear the problems.

OECD has developed a detailed Guidance on Meaningful Stakeholder Engagement for the Extractive Industries. The guidance includes an annex particularly on engagement of indigenous people. A translation into the Sami language was introduced at a seminar taking place back-to-back with the assembly of the Sami Parliament in Northern Norway in June 2019.

Even so, at a meeting on mining and sustainability, which took place in Northern Sweden later in June 2019, we observed very limited awareness of the guidance and relevant global guidelines among local NGOs and other civil society organisations. In fact, awareness is higher with some companies. Lack of knowledge of the normative standards that apply to companies make it difficult for civil society to require that companies observe the norms.

The OECD Guidelines and the UN Guiding Principles are not binding but mark a tendency towards recognition of individual access to influence through making one’s views and concerns known, even if this may not take place through a formalized process.

Overall, the past 40 years have witnessed a development in international environmental and human rights law towards direct access for the individual to partake in decision-making on business activities affecting one’s life [Pring and Noé, 2002]. Rights of indigenous and tribal peoples to be involved in decision-making on mining and other forms of natural resource extraction are often highlighted in this context [Triggs, 2002]. Consultations can form one element among others in ensuring such participation.

Mandatory requirements

The Nordic countries, which include Arctic areas, have long mandated planning of specific types of activities to include assessments of the environment so that the information can form part of the authorities informed decision-making. In some Nordic countries environmental impact assessments include broader societal aspects, such as impacts on health, employment, traditions and business operations [Nenasheva et al. 2015].

Specific requirements of separate assessments of societal impacts are less common in a Nordic context. However, Greenland’s self-government has introduced explicit requirements in the Act on Raw Materials mandating social sustainability assessments of activities that are may have significant societal impacts. Greenland has also introduced rules enabling authorities to make permits conditional on the company contribution to society, for example through vocational capacity building, employment of local labor, or locally based processing of explored raw materials.

Our project has shown that there are diverse opinions of such ’Impact Benefit Agreements’ (IBAs) that are tailored to each specific project and local context. While IBAs offers opportunities to agree on specific local measures, limited transparency on the contents reduce opportunities to develop solutions across projects.

Authorities can introduce specific requirements on the consultation process through general or special legislation. While such demands vary between countries, involvement of local communities and other affected stakeholders is a general element [Vanclay and Esteves, 2012].

Common demands on a good consultation process

As regulations and levels of detail vary between countries and types of impact assessments, specific demands on the process will not be described here. However, general indications are given by the so-called Aarhus Convention [UN 1998], which fleshes out the implications of the political decisions from the 1992 Rio Summit concerning public participation in decision-making concerning projects with environmental impacts.

The convention also covers human health and safety, locations of cultural significance etc., provided the impacts have a connection to the environment.

The Aarhus Convention establishes that:

  • the public must be informed about an activity in the early stages of a decision-making process;
  • the information must, among other things, include the character of the activity; what permit is applied for; the responsible authorities, timeline, place and procedure for public consultations on the activity; and available information on the activity’s impacts on environment, health etc.;
  • the information must be free and provided as soon as it is available;
  • reasonable time should be set aside between different phases of the process, and therefore both to inform citizens and for citizens to prepare and actively participate in the decision-making process;
  • the applicant for a permit is encouraged to actively engage in dialogue and to contribute information on the project;
  • authorities are responsible for making relevant information accessible, for example on the location for the activity, impacts on the environment in a the above sense (inclusive of health and safety), what measures will be taken to prevent adverse impacts, and alternatives to the proposed plan;
  • a summary of the information must be provided in a non-technical form that can be understood without technical prerequisites;
  • the consultation process must provide citizens with opportunities to express comments, information, knowledge and views that they find relevant. Citizens or NGOs who perceived their rights to be infringed upon are to have access to remedy provided by a court of law or another independent institution.

The Aarhus Convention has been signed by most European countries, including the Nordic states, and a few Central-Asian states.

Obviously, participation in a consultation process should not require participants to be familiar with the law, nor should the quality in principle depend on participant’s awareness of the informing normative foundations. It is possible, especially in countries with well-functioning public institutions, to ask the relevant authority to explain the rules and requirements and their implications. Elsewhere, civil society organisations are often able to provide advice and guidance.

Consultations aim to create dialogue, not conflict

Even if participation in a consultation is not a claim to having one’s view win out, a consultation is ideally a dialogue between citizens and the authorities or companies that conduct the consultation.

Consultations build on an aim of exchanging knowledge, views, concerns and needs and thereby to provide the best possible informed foundation for decisions and for projects to be adapted and regulated in response to the concerns and needs that have been voiced or identified through the consultation.

Both process and outcome depend on the involved understanding and respecting that the process builds on a conversation which is not about identifying a winner and a loser, but rather a dialogue towards an adapted result which may be a compromise between the original project idea and the thoughts, concerns and views expressed during the consultation process.


References

Esteves AM, Franks D, Vanclay F (2012) Social Impact Assessment: the state of the art, Impact Assessment And Project Appraisal 30(1) 43-42.

Nenasheva M, Bickford SH, Lesser P, Koivurola T & Kankaanpää P (2015). Legal tools of public participation in the Environmental Impact Assessment process and their application in the countries of the Barents Euro-Arctic Region, Barents Studies: Peoples, Economies and Politics 1(3) 13-35.

Pring, George (Rock) and Susan Y. Noé (2002). The Emerging International Law of Public Participation Affecting Global Mining, Energy, and Resources Development, in Zillman, Donald M., Alastair Lucas and George (Rock) Pring (eds) Human Rights in Natural Resource Development: Public participation in the Sustainable Development of Mining and Energy Resources, Oxford Scholarship Online, DOI: 10.1093/acprof:oso/9780199253784.003.0002.

Triggs, Gillian (2002). The Rights of Indigenous Peoples to Participate in Resource Development: An International Legal Perspective, in Zillman, Donald M., Alastair Lucas and George (Rock) Pring (eds) Human Rights in Natural Resource Development: Public participation in the Sustainable Development of Mining and Energy Resources, Oxford Scholarship Online, DOI: 10.1093/acprof:oso/9780199253784.003.0004.

UN (1998). Convention on Access to Information, Public Participation in Decision-Making and Access to Justice in Environmental Matters (Aarhus Convention).


About the Author

Karin Buhmann is Professor at Copenhagen Business School, where she is charged with the emergent field of Business and Human Rights. Her research interests include what makes stakeholder engagement meaningful from the perspective of so-called affected stakeholders, such as communities, and the implications for companies and public organisations carrying out impact assessments.


Photo by Clay Banks on Unsplash

Aspirational talk for a challenging walk

Professor Mette Morsing takes over the UN PRME  

By Jeremy Moon

The CBS Sustainability Centre and the Department of Management, Society & Communication (MSC) recently held a Panel Discussion to farewell Mette Morsing as she becomes the new Head of PRME (Principles for Responsible Management) based at the UN Global Compact office in New York.

This is clearly a challenge. Mette will be a rare academic in a world of international officials. She will lead a small team that supports the PRME initiative. PRME is intended to transform business and management education through research and leadership. It consists of 800+ business and management schools that have signed up to implement six principles concerning responsible and sustainable business education.  

Of course, the 800+ schools reflect very different educational and business cultures, and may have very different understandings of responsible and sustainable business. Doubtless the schools have other concerns so they may prioritize these differently… not least in these troubled times.

So in order to help – as well as challenge – Mette, we designed the Panel around the question: “What Should Business Schools Know and Do about Sustainability?”  The Panel duly raised challenges for Mette, reflecting their various vantage points around business and management education. The Panel members were:

  • Lise Kingo, Independent Board Member and former CEO & Executive Director, United Nations Global Compact (by video)
  • Florence Villeséche, Co-Director of the Diversity and Difference Platform and Associate Professor at Dept. of Management, Politics and Philosophy
  • Gregor Halff, CBS Dean of Education
  • Caroline Aggestam Pontoppidan, Academic Director of CBS PRME & Associate Professor at Dept. of Accounting
  • Claus Meyer, food entrepreneur and Adjunct Professor at the Department of Management, Society & Communication.

Mette Morsing responded to the perspectives raised by the Panelists and other participants were drawn into the conversation. This covered a range of issues and approaches to the sustainability challenges:

From the role of the ethic of care for people in business, to the role of data in sustainability; from how to integrate and govern environmental, social and governance responsibilities to forms of business school engagement for sustainability; and of course, strategies for green transformations.

I was particularly struck by the way that Claus Meyer contextualized his own work in the state of the food business which he described as being characterized by greed, obesity and other recipes for ill-health, over-supply, and starvation among other things. So, Claus takes a big picture and identifies and develops his responsibilities in his bakeries, restaurants and philanthropic work in this light.

How should Deans of Business Schools regard ‘their business’?

On the one hand, they could refer to the market for business management education, demand and supply; vital assets; competitors and collaborators; the impact of and influence upon regulators. But what I get from Claus is the big picture thinking.

So should the Deans bring into their strategic thinking the circumstances from which their students come – and don’t come, and the state of the businesses that their graduates enter (the distributions, resource uses, the dominant values)?

Isn’t this what they need to know for understanding and developing their impact on sustainability?  Is this the logic of a stakeholder approach to sustainability?

OK, Jeremy this is just talk… but as Mette reminded us in one of her most significant papers, aspirational CSR talk may be an important resource for social change … and thus part of the walk [1]. So, my parting advice to Mette is to try and get Business School Deans to better understand and connect with their wider context in order to act for sustainability.


References

[1] L.T. Christensen, M. Morsing & O. Thyssen (2013). CSR as aspirational talk. Organization, 20(3), 372-393.


About the author

Jeremy Moon is Professor at Copenhagen Business School, Chair of Sustainability Governance Group and Director of CBS Sustainability. Jeremy has written widely about the rise, context, dynamics and impact of CSR.  He is particularly interested in corporations’ political roles and in the regulation of CSR and corporate sustainability.

Different pathways to sustainability standard adoption

How local norms may be able to help drive the spread of voluntary programs – the case of the RSPO in Japan.

By Hattaya Rungruengsaowapak, Caleb Gallemore & Kristjan Jespersen

There has been an explosion in voluntary programs targeting value chains’ negative social and environmental impacts (Green, 2013). Working across boundaries, however, is challenging, and requires bridging different business cultures and moral expectations. Tensions and consequential misunderstandings between members from different countries are common.

The Roundtable on Sustainable Palm oil (RSPO) is a good example. It has seen a five-fold jump in Japanese membership in just five years, going from under 40 members in 2016 to more than 200 in 2020. This has happened in the absence of meaningful governmental support or even consumer demand, making it a particularly interesting case.

Source: The RSPO (as of August 9th, 2020)

The RSPO was founded in 2004, led by WWF, Unilever, and some upstream players in the palm oil value chain. Its objective is to incentivize sustainable palm oil production using voluntary certification. Although oil palm is one of the most efficient oil-producing crops, its growing consumption has led smallholders and large agribusiness to convert tropical forests to plantations, causing habitat and biodiversity loss, greenhouse gas emissions, and wildfires.
While the RSPO welcomed its first Japanese members the year of its founding, it only recently saw memberships skyrocket, despite limited concern among Japanese consumers. These developments took place in three main phases.

Phase 1 – Testing the waters (2004 – 2011)

For nearly the first decade of the RSPO’s existence, Japanese membership growth was sluggish. Japanese companies that joined the RSPO early on mostly relied on international markets for a significant part of their business.

These companies included major trading houses like Mitsui & Co., Ltd, and consumer goods manufacturers like Kao. Multinational companies headquartered in the West, such as Unilever and Walmart, also implemented sustainable palm oil commitments in Japan, but these actions had little impact on their Japanese suppliers.

Some smaller Japanese companies also joined the RSPO in this phase, in response to some niche consumer demand. These niche actors, however, did not scale up demand across the country.  

Phase 2 – Setting the groundwork (2012 – 2016)

Between 2012 and 2016, a larger number of Japanese firms joined annually than in the previous period, though never more than ten in any given year. In 2012, when Tokyo became a host city candidate for the ultimately ill-fated 2020 summer Olympics, the RSPO began directing more attention towards the Japanese market.

A central goal was to convince the local Olympic Committee to include the RSPO in their official sourcing code. According to an informant, the World Wildlife Foundation (WWF) began to hold corporate sustainable palm oil workshops the same year. Other events helped boost RSPO recognition during this period. For example, in 2015, the Japanese government officially adopted and started to promote Sustainable Development Goals (SDGs). In the same year, the Consumer Goods Forum, a global network of manufacturers and retailers, issued its Sustainable Sourcing Guideline. T

The period closed with the largest sustainable palm oil event in Japan to date – the RSPO Japan Day 2016 – where RSPO advocates draw on these events and urged more than 350 attendants from major companies in Japan to become members.

Phase 3 – Takeoff (2017 – 2020)

By 2017, many companies using palm oil in their products were aware of the issues associated with oil palm production. Two powerful actors, however, were central in pushing firms from awareness to action. The first was the Tokyo Organising Committee for the Olympics Games (TOCOG), which officially included certified sustainable palm oil in the Games’ sourcing code. The other was AEON, the biggest retailer in Japan and a member of the Consumer Goods Forum, who vowed to procure 100% certified sustainable palm oil for more than 3,500 of its house-brand items by 2020.

These moves forced several suppliers to seek certified sustainable palm oil sources. Thankfully, RSPO advocates ongoing work had led to the creation of various programs to support Japanese firms’ RSPO membership.

The RSPO opened a Japan office in 2019, and at around the same time, the WWF started Japan Sustainable Palm Oil Network (JaSPON). With suppliers already prepared, some downstream firms found it more attractive to join the RSPO at this time. Competitors of existing RSPO members, in turn, started making sustainability commitments for fear of public criticism. 

Throughout the RSPO’s development in Japan, end-product consumers’ pressure has had a limited impact on firms’ decisions to join. The pressure to conform to sustainability standards created by the advocates targeting lead firms with vast supply networks, however, appears to have accelerated RSPO’s market growth. One possible explanation for this phenomenon is the Japanese norm of long-term relationships between firms with buyers-suppliers ties, which, in some cases, include cross-shareholdings between them. Such a group of firms is alternatively known as keiretsu.

Although keiretsu is not well defined, it is generally referred to as personal, capital, and business relationships in relation to business transactions (Yaginuma, 2014). Collective commitments commonly observed in firms within a keiretsu may have made lead firms more likely to support their suppliers’ efforts to get certified, rather than switching to other suppliers.

Even though RSPO memberships in Japan have increased rapidly, it is unclear whether this will translate into substantial increases in certified sustainable palm oil uptake. Many manufacturers’ suppliers are relatively small. They are often sensitive to any additional costs, and limited bargaining power with which to procure certified oil.

Moreover, since end consumer awareness continues to be low, businesses receive no additional remuneration for their sustainability investments, which may force them to cut costs elsewhere.    

These problems aside, Japan exemplifies an intriguing model of sustainable business practice adoption resulting from the local business norms. Thanks to the strong ties between Japanese firms, the RSPO was able to establish a foothold in the industry despite the lack of demand for sustainable palm oil from the civil society – a sharp contrast to patterns in the West. 


References

Green, J. F. (2013). Rethinking private authority: Agents and entrepreneurs in global environmental governance. Princeton University Press.

RSPO. (n.d.). Members. Retrieved 2020-08-09

Yaginuma, H. (2014). The Keiretsu Issue: A Theoretical Approach. Japanese Economic Studies.


About the authors

Kristjan Jespersen is an Assistant Professor at the Copenhagen Business School. He studies the growing development and management of Ecosystem Services in developing countries. Within the field, Kristjan focuses his attention on the institutional legitimacy of such initiatives and the overall compensation tools used to ensure compliance.

Hattaya Rungruengsaowapak is a fresh graduate from Business, Language and Culture at CBS. She has extensive experience in Japan, especially within supply chain and sustainability from a leading consumer goods manufacturer prior to her studies at CBS.

Caleb Gallemore is an Assistant Professor in the International Affairs Program at Lafayette College. He holds a Ph.D. in Geography and within his teaching, he focuses on southeast Asia, global land use, sustainability, research methods and geographic information science.


Photo by Nazarizal Mohammad on Unsplash