Category Archives: Reporting

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Adventures in Materiality. Notes from the first CBS Sustainability Seminar

By Steen Vallentin.

  • On October 31, 2017 the new CSB Sustainability seminar series was launched
  • With a room full of practitioners and academics, the topic “Materiality and Quantification” in CSR and sustainability reporting was discussed
  • Diverse input for discussions were given by presentations by CBS, DTU and a practitioner in corporate sustainability reporting

Approximate reading time: 4-5 minutes

All we need is Materiality?
Materiality is arguably gaining significance in corporate approaches to CSR and sustainability. While strong narratives remain important, they do not suffice in a world filled with increasing amounts of data calling for transparency and factual assessment of corporate accomplishments, progress or decline. There can, however, be a price to pay for an increasing reliance on metrics and measurements. What happens to ethical and moral concerns, to fundamental values and the sense of overall purpose if CSR/sustainability is reduced to a technical matter of taking numbers and ticking boxes? This was the topic of the first in a new series of CBS Sustainability Seminars. Here is some background on the topic and the seminar series, plus some notes on the presentations of the day.

The rise of materiality in CSR and sustainability
Sustainability reporting and efforts to assess the materiality of corporate responsibilities toward the people and the planet are undergoing interesting transformations these years. Not only is sustainability reporting becoming a more and more widespread practice internationally, due to mandatory disclosure requirements and the institutionalization of standardized reporting formats such as GRI and integrated reporting. We are also, among other developments, witnessing corporate efforts to integrate adherence to the UN Sustainable Development Goals into non-financial reporting formats, including materiality assessment, and companies committed to set and communicate science based emission reduction targets (see Science Based Targets).

The new cbsCSR sustainability seminar series: research-based & multidisciplinary
Hence, “Materiality and Quantification” was an obvious choice as topic for the first event in the new series of CBS Sustainability seminars that will be taking place from the Fall of 2017 and onwards. The inaugural seminar took place on October 31 and featured three speakers: Professor Andreas Rasche from CBS, Frances Iris Lu (CBS and Maersk) and associate professor Niki Bey from the Technical University of Denmark (DTU).

The purpose of the seminar series is to forge closer ties between researchers at CBS and professionals from companies and organizations – to enable collaboration and easier access to each other’s knowledge and resources on an ongoing basis. And to build stronger relations among researchers at CBS. The USP of the network is that it is research-based and multi-disciplinary. One aim is to help bridge divides between knowledge silos and facilitate dialogue between different knowledge disciplines. Another aim is to broaden the scope of how we think and speak about sustainability, and to explore how far we can take this concept – in different  indicated by its three pillars: environmental, economic, social. To this end, the seminar series will present many speakers from CBS and other research environments that would not ordinarily see their research as part of a sustainability agenda.

Materiality assessments are no moral assessments
In the first seminar, however, we were on familiar ground with regard to sustainability. Based on a forthcoming research paper (using data from the Netherlands and co-authored with Koen van Bommel and André Spicer), Andreas Rasche showed how sustainability reporting has gradually developed into being a more and more standardized and technical practice. A key concept in this research is commensuration, which refers to the process of transforming different qualities into a common metric. It reduces and simplifies ‘thick’ information into metrics that are comparable to other metrics. Over time, commensuration stimulates a standardization of the meaning of sustainability. When something is turned into a metric and standardized, it often leads to a crowding out of moral questions and concerns. Subsequently, sustainability reporting can be a driver of ‘amoralization’ processes by which questions of morality, values and purpose are replaced by technical performance measures. On the one hand, this technical and instrumental turn can be part of the explanation for why sustainability reporting has become so popular (because it sidelines ambivalence and difficult moral quandaries). This need not be an entirely negative outcome, as pointed out by a participant, because it can be an indicator of increasing business integration of sustainability. We do, however, on the other hand, need to be aware of the possible downsides of this proposed ‘technicalization of sustainability’.

Moving beyond ethical idealism – the price to pay for conquering the mainstream?
While this finding is based on a longitudinal empirical study, I have made a similar point in a conceptual paper reflecting on the effects of instrumentalization in the realm of CSR more broadly. To quote myself (at length):

“As a result [of instrumentalization], it is now all too easy to speak of CSR without making any mention of ‘ethics’ or bringing up moral issues or dilemmas; a development that can lead to a strangely depersonalized understanding of responsibility and which raises questions about the relevance of ethics for CSR altogether. Whether this is a problem or not is of course debatable. On the one hand, it can be considered as a sign of progress in the sense that the CSR debate (and CSR as corporate practice) has decidedly moved beyond ethical idealism and the subjectivity/arbitrariness that may be associated with individual values and choices. CSR has developed into a socially embedded, highly institutionalized and material phenomenon. On the other, it is worth pondering what, if anything, has been lost on the path to (apparent) victory in the public realm of ideas. Is the displacement of ‘ethics’ a sign that the responsibility discourse has lost its normative bearings and that this has been the price to pay for conquering the mainstream?”

A practitioner’s perspective on values & materiality: We can have it all – (can we?)
Frances Iris Lu gave a presentation of the evolution of materiality and materiality assessments in recent years, drawing on her experience from KPMG and Mærsk. She showed how materiality assessments can often, in practice, be rather loose exercises bereft of analytical rigor, but also how it is possible to add more rigor to the process. One key feature (and possible limitation) of a conventional materiality assessment is that it tends to focus strongly on the risk as opposed to the opportunity side of responsibility, making it difficult to reconcile with policies aiming to create (shared) value.

To bridge this gap, and to make room for the company values in the account of materiality, Mærsk has created a new ‘materiality beyond the matrix’ model. Frances presented this new and more comprehensive and multi-faceted model which accounts for materiality under the three headings: Risk, Shared Value, and Responsibility. Challenging the amoralization narrative presented by Andreas, Frances argued that we are seeing a sort of pendulum swing taking place in sustainability right now where values and purpose are getting more attention – alongside the continued focus on metrics.

Materiality and Quantification in practice: The Life Cycle Assessment Lens
Finally, Niki Bey brought the quantification of sustainability through Life Cycle Assessments (LCA) into the discussion. LCA is used as a general framework to avoid the problem of cost shifting across impact categories (e.g. using less plastic might ultimately increase food waste). Although the LCA is never completely objective, we need to try to approach matters of sustainability systematically and to focus on available facts – how far can we get in terms of what we know and what we can measure, instead of focusing on subjective criteria.

A participant mentioned enthusiastically that the LCA is the most important decision-tool she has ever worked with because it makes people able to move up and down in perspective and allow them to see the bigger picture in regard to sustainability and corporate responsibilities. While LCA is usually applied as a relative measure that can be used to compare and choose between different courses of action, it can also be applied in an absolute fashion, as with the Planetary Boundaries.

Overall, the seminar brought out as many questions as it did answers. We look forward to continuing this and other adventurous discussions in future CBS Sustainability seminars.

Steen Vallentin is Director of the CBS Centre for Corporate Social Responsibility (cbsCSR) and Associate Professor in the Department of Management, Society and Communication at Copenhagen Business School.

Pic by Miguel A. Amutio, edited by BOS.

Accountability, Communication, Concepts, CSR, Featured, Models, News, Reporting

Enjoy the Silence? CSR Communication and the Phenomenon of “Greenhushing”

By Dennis Schoeneborn.

  • Why do some companies don’t “talk their walk”?
  • Especially SMEs face cost barriers to CSR communication
  • Scandals or reputational crises taught companies to be very careful with their CSR communication
  • Yet, there are reasons why firms should engage in CSR communication nevertheless…

All I ever wanted
All I ever needed
Is here in my arms
Words are very unnecessary
They can only do harm
(Depeche Mode – Enjoy the silence)

When firms talk in public about their CSR activities, a common suspicion (by critical activists, journalists, academic scholars, etc.) is that they would only do so for the purpose of “greenwashing”. The term greenwashing, in turn, implies that firms would talk in public about CSR (primarily to gain reputational benefits) but without actually “walking the talk”, i.e. putting CSR into practice. However, a recent study by Font et al. (2017) in the tourism industry highlights that a common practice in CSR communication rather seems to be the contrary, i.e. what is called “greenhushing”. This term refers to situations where firms indeed put in CSR into practice but deliberately under-report about these activities.

Cost barriers for SMEs
So what might be the root causes for greenhushing? First, extensive CSR communication is costly. As Wickert et al. (2016) argue, small and medium-sized enterprises (SMEs) are particularly likely to engage in greenhushing. This is because SMEs, if compared to large firms, can more easily implement CSR activities in their business practices (due to usually less complex value chains) but it is harder for them to run a centrally located CSR department (that would be in charge of public CSR communication), as it would require a comparatively larger chunk of their overall costs.

Fearing the spotlight
Second, extensive CSR communication can backfire. For instance, firms are confronted today with the risk of eruptive scandalizations or “firestorms” in social media. In turn, firms become increasingly cautious about exposing themselves too strongly with public CSR communication, fearing that they would be in the spotlight of particularly harsh critique as soon as they are hit by a scandal or reputational crisis. Accordingly, some scholars (e.g., Morsing et al., 2008) recommend that firms should pursue a rather modest approach to CSR communication, while relying primarily on third-party endorsements.

Reasons to break the silence
In sum, should firms follow Depeche Mode’s advice to “enjoy the silence” and simply avoid any CSR communication in public? There are a couple of good reasons why firms should engage in CSR communication nevertheless. For instance, in order to further advance CSR practices, public communication by leading and committed firms is needed, also because these firms can ideally serve as role models that can inspire other firms in their industries or beyond. Furthermore, committing publicly to CSR can serve as an important resource for initiating intra-organizational change towards integrating CSR in core business practices (see also Christensen et al., 2013). In any case, further research will be needed to shed light on how firms can successfully navigate their ways in CSR communication – without greenwashing, -hushing, nor -blushing.

Dennis Schoeneborn is a Professor of Organization Studies at Leuphana University Lüneburg and a Professor (MSO) of Organization, Communication, and CSR at Copenhagen Business School.

This post is part of our new series “BOS Blog Classics” in which we revive and refresh selected posts from the old BOS Blog that is not up and running anymore…

Pic by franciscopgr, Fotolia.

Accountability, Concepts, CSR, Development, Economic, Ethics, Featured, Governance, Issues, Models, News, Partnerships, Regulation, Reporting, Standards

CBS new Knowledge Partner of the OECD

By Karin Buhmann.

In early 2017 CBS accepted an invitation from the Organisation of Economic Collaboration and Development (OECD) to become an OECD Knowledge Partner. As an OECD Knowledge Partner, CBS joins a small group of prestigious universities – including the University of Geneva, the University of Sydney, London School of Economics and SciencesPo (Institut d’études politiques de Paris) – that are invited to share and discuss research based knowledge with the OECD, thus enhancing its ability to deliver on regional and global challenges related to economic collaboration and development. For 2017 CBS was invited to participate in two key ways: scholarly interaction at the annual political OECD Global Forum, and contributing an article to the OECD Yearbook. Both were connected to the topic at this year’s Global Forum: Bridging Divides, with particular focus on inclusive growth, digitalization, and trust.

Three CBS professors (Karin Buhmann (MSC), Kim Andersen (DIG), and Christian Asmussen (SMG) and the CBS Vice-President for International Affairs (Dorte Salskov-Iversen, who is also Head of Department of MSC) participated in the OECD Global Forum, which took place at the OECD Headquarters in Paris on 6-8 June 2017. Presenting and moderating at an ‘Idea Factory’, Professor Kim Andersen shared views on artificial intelligence. Professors Christian Geisler Rasmussen and Karin Buhmann interacted with OECD experts on issues of Inclusive Growth and the Location Choices of Multinational Firms (Geisler Rasmussen) and The role and challenges of OECD’s Guidelines for Multinational Enterprises for building trust through Responsible Business Conduct in a context of global competition (Buhmann).

With permission from the OECD, the CBS contribution to OECD’s 2017 Yearbook  is reproduced in the following.

Responsible Business Conduct and Competition: OECD’s Guidelines for Multinational Enterprises and responsible supply chain management

By Karin Buhmann, Copenhagen Business School

Surprised looks with colleagues or students are commonplace when I observe that the OECD plays an important part for the promotion of responsible business conduct (RBC), not just in OECD countries but globally. RBC is OECD ‘speak’ for corporate social responsibility, corporate sustainability and other terms indicating an expectation that businesses take responsibility for their impact on society. The OECD’s key normative instrument for RBC, the Guidelines for Multinational Enterprises, and the remedy institution that adhering states commit to establishing, the National Contact Points (NCPs), are relevant to help offset some of the social cost that competition causes to employees and communities. The Guidelines provide norms of conduct for MNEs and for how they should act to avoid harmful impact caused by their supply chains. Revised several times since first adopted in 1976, the Guidelines provide normative standards in regard to human rights, labour/employment and industrial relations, environment, bribery, consumer concerns, science and technology, competition and technology. The Guidelines also apply to institutional investors, including minority shareholders.[1] Jurisprudence (‘case law’) emerging through complaints (‘specific instances’) handled by NCPs elaborates the practical implications of the Guidelines for companies and investors, within and beyond the sector and country concerned by each case. Like the Guidelines have extraterritorial reach beyond MNE home states, NCPs may also deal with business conduct arising in non-OECD states or other states having acceded to the Guidelines (provided a connection to that state).

A case[2] that was recently handled by the Danish NCP highlights the pertinence of OECD’s Guidelines at a time when SMEs too have transnational operations, as well as of the evolving guidance developed by NCPs. The case concerned a Danish textile company that sourced from a supplier in the Rana Plaza building at the time of its collapse in 2013.

The Guidelines are recommendations from governments to companies operating in or out of states (whether or not OECD-Members) adhering to the Guidelines. With the 2011 revision, the Guidelines adopted the risk-based due diligence approach.[3] This is a process for companies to identify, prevent, mitigate and account for their impact on society. Whereas corporate legal or financial liability due diligence aims at protecting the company against harm, risk-based due diligence is about protecting society against harm caused by the company or its business relations. Of course, if done well it also protects the company against liability or reputational harm.

The case on the Danish textile company concerned the adequacy of the company’s due diligence to prevent harm directly linked to its operations by a business relationship. The NCP found that the company did not apply processes for due diligence in compliance with OECD’s MNE Guidelines. In particular, the company failed to make demands that its supplier ensure employees’ human and labour rights, including through adequate steps to ensure occupational health and safety. As to whether the company had acted consistent with what it argued to be buyer practice in regard to building inspection, the NCP observed that practice by itself may be indicative, but not conclusive regarding the scope of risk-based due diligence. In other words, a company must think and act for itself in regard to demands on suppliers to take ap­propriate measures to ensure health and safety in the workplace. Thus, the NCP statement elaborates on the practical implications of the Guidelines and due diligence for companies in the textile and other sectors for the future, in regards to building safety and supply chain management.

The collapse of the Rana Plaza building was a wake-up call in many OECD countries concerning the human and social cost that can be the price for the quest for economic gain that drives much competition. Global companies have long taken advantage of wage differentials and weak regulation to keep costs low.[4] Concerns with labour and human rights have been strong if too often ineffective drivers for corporate change and the conditions for competition.[5] The textile sector is not unique in competition causing adverse social or environmental impacts. Agri-industry and mining are among sectors in which adverse social and environmental impacts of business activity are regularly reported. Enhanced knowledge of OECDs MNE Guidelines may contribute to promoting RBC in such transnational economic activities.

 

[1] OECD (2014) Scope and application of ‘Business Relationships’ in the financial sector under OECD’s Guidelines for Multinational Enterprises, Paris: OECD Global Forum on Responsible Business Conduct.

[2] Final Statement on Specific Instance notified by Clean Clothes Campaign Denmark and Active Consumers regarding the activities of PWT Group.

[3] The term was adopted from the United Nations Guiding Principles on Business and Human Rights (UNGPs), United Nations Human Rights Council (2011) UN Doc. A/HRC/17/31.

[4] Krugman P, Obstfeld M, and Melitz M (2014). International Economics: Theory and Policy, Global Edition. 10th ed. Online: Pearson.

[5] Ruggie J (2013) Just Business – Multinational Corporations and Human Rights. Boston: W.W. Norton.

Karin Buhmann is professor at Copenhagen Business School (CBS) where she is charged with special responsibilities for Business & Human Rights, and a part-time member of the Danish National Contact Point (NCP) under OECD’s Guidelines for Multinational Enterprises. Her academic background is in international human rights law.

Pic by Solidarity Center, edited by BOS.

Accountability, Concepts, CSR, Environment, Featured, Issues, Models, News, Partnerships, Reporting, Social, Standards, Sustainability

Who’s responsibility is it, anyway?

By Erin Leitheiser.

Workers and companies from across the globe each play a part in creating our clothes.  Yet, it’s unclear who is responsible for addressing the myriad of social and environmental sustainability issues in these global supply chains. 

Who is responsible for the social and environmental sustainability of the denims that you’re wearing? 

Chances are that when you check the tag you’ll see the name of a country like Bangladesh, China or Turkey.  While global sourcing from these and other textile hubs has been common practice for decades, we still face major issues related to child labor, poor and unsafe working conditions, modern slavery, gender inequality, pollution, and many more.  Partnerships and collaborations have sprung up across the board to address supply chain issues, with just a few examples including an initiative to remedy the safety of ready-made garment (RMG) factories in Bangladesh, attempts to raise the standards and traceability of extractive industries, and Ethical Trading Initiative’s recent launch of a platform for ethical trade in Turkey. 

While partnership and collaboration form the foundation of many of these efforts, there remains great confusion about who is and should be responsible for what in supply chains.  Looking specifically at ready-made apparel (RMG) supply chains, here’s a glimpse into some of the murky roles and responsibilities. 

  • Consumers.  Consumers are held up as king in the world of retail, and may indeed have great (collective) power through purchasing behavior.  Yet, it is difficult if not impossible for consumers to make informed choices about how and where a product was made.  (Side note: a relatively new NGO has been established to create a consumer-facing scoring system to help combat this issue.)  And, even ethically-minded consumers are rarely willing to sacrifice style or price for sustainability.  Therefore, consumers often point to the brands and retailers who put product on the shelves as responsible for ensuring the social and environmental sustainability of all of their offerings. 
  • Brands and Retailers.  The giants of the RMG world, brands and retailers demand high volumes, quick turn-around times, and low prices in their industry of fast fashion.  Even large brands and retailers don’t own many – if any – of their own factories, so instead, opt to purchase goods from a vast network of third-party suppliers.  While virtually all buying companies have codes of conduct governing things like child labor and basic safety practices, any one company’s orders may only constitute a small fraction of a factory’s production, making leverage with the supplier to make changes and upgrades difficult at best.  This may be even more problematic for small brands and retailers whom may depend upon agents (the industry’s equivalent of your friend who “knows a guy”) to find and contract with suppliers. 
  • Suppliers (Factories).  Suppliers simultaneously face downward price pressure and increasing compliance requirements.  First, suppliers must be able to produce a quality product within a short period of time for the right (low) price.  Then, they must comply with each and every buyer’s code of conduct, some of which include additional third party certification (e.g. Oeko-Tex certification on harmful chemicals and substances, a virtual requirement for any producer of maternity or children’s wear).  At the same time they often need to rely upon sub-suppliers to complete orders on time since particularly small factories (under 300 workers) employ enough people to be able to quickly deliver orders for 5,000, 10,000 or more pieces, which adds an additional layer of complexity and transparency. Suppliers often resist worker unionization or other process improvements beyond what is demanded by buyers, in part fearing soaring costs that will make them uncompetitive in the marketplace. 
  • Local Governments.  Governments in supplying countries are responsible for setting and enforcing the laws governing the industry.  While most countries with significant production levels have reasonable laws in place regarding human rights, child labor, and environmental impact, those countries also often suffer from a great lack of enforcement of said laws for a myriad of reasons: lack of financial resources, insufficient staffing levels, inadequate processes and capabilities, and bribery and corruption, to name a few. 
  • UN and ILO.  The UN Guiding Principles on Business and Human Rights and ILO’s Decent Work agenda provide standards and a framework from which businesses can formulate and evaluate their human rights and labor policies.  While crucially important tools, neither have the purview or power to compel uptake or compliance. 

This brief overview of just the major players in global textile supply chains shows how blurred the responsibilities are for social and environmental sustainability.  No one person or party is responsible for or can solve the challenges we face.  But, if we can all be open to change and accept that we each bear some responsibility for solving the issues, we have a fighting chance to make systemic and meaningful change in the industry.  Indeed, in the words of Andrew Carnegie, “do your duty and a little more and the future will take care of itself.”

Erin Leitheiser is a PhD Fellow in Corporate Social Responsibility and Sustainability at Copenhagen Business School.  Her research interests revolve around the changing role and expectations of business in society.  Prior to pursuing her PhD she worked as a CSR manager in a U.S. Fortune-50 company, as well as a public policy consultant with a focus on convening and facilitating of multi-stakeholder initiatives.  She is supported by the Velux Foundation and is on Twitter @erinleit.

Pic by Unicef, found on Flickr

Accountability, Communication, Concepts, Featured, Models, News, Regulation, Reporting, Stakeholders

The Dark Side of Transparency

By Lars Thøger Christensen.

Transparency is essentially about creating insight into organizational and institutional practices in order to allow for critique, stimulate improvement and hold politicians and decision makers accountable. As such, transparency is an essential dimension of a rational, open and democratic society. Without transparency, there is great potential for manipulation, negligence and fraud. Yet, transparency may itself be manipulative. Even when the intention is to disclose and stimulate insight, the results may be less benign. Whenever something is illuminated and pulled out for further inspection, something else remains in the dark.

Any serious pursuit of transparency needs to consider what the pursuit itself is doing to public insight, what it “hides” so to speak and what remains out of view.

Part of this problem resides in the way we understand transparency. While openness and insight may be the ultimate goals, it is commonplace to define transparency in more prosaic terms, for example as information provision. With oceans of information available at our fingertips, the world certainly appears far more transparent than ever before. Yet, accurate information about complex issues, such as sustainability or social responsibility, is usually not easy to digest. Most information about such matters, thus, is often accessible only to experts. And whenever it is made accessible to lay people, it has been subjected to multiple processes of editing and simplification.

No information speaks for itself and attempts to make it “speak” hide as much as it disclose.

Another problem concerns the organizational behavior we hope to see and understand better through practices of transparency. If we think that organizations and decision makers continue to conduct business as usual when subjected to increased transparency, we are utterly wrong. Transparency is not a neutral tool that simply illuminates a preexisting world. When people in organizations know that their talk, decisions and actions are publicly accessible, they are less inclined to experiment, take chances, share ideas, or talk freely about their accomplishments, ideals, assessments and aspirations. This is the case in numerous organizational processes, including meetings, bargaining games, conflict resolutions, idea generation, etc. where the need to withhold some information and protect identities or strategic positions are often important concerns. In such cases, the willingness to share complete and accurate information may be limited and replaced by a desire to “send the right signals” or make the right impressions.

Transparency may cause organizational members to hold back or otherwise adjust behavior.

As a result, we may see less than we think. Even when transparency is enforced by rules and regulations, like for example social responsibility reporting in some countries, participants have a tendency to alter and edit their behaviours in ways that conform to social norms and expectations (i.e. by creating a “front”). Organizational behaviour is certainly not unaffected by increased transparency demands. Thus, we know that organisations carefully select, simplify, and summarize data before they are revealed, that they selectively disclose or leak information, for example through competitive signalling and they shrewdly manage the timing of disclosure, sometimes with the intention of deflecting critique or handling potential issues. Moreover, producers and custodians of data often shift the medium, the classification scheme, or the level of comparisons when forced to share information that used to be confidential.

Demands for more transparency are likely to be handled strategically by organizations.

None of this is to suggest that transparency should be avoided or reduced. Quite the contrary. But it is a reminder that transparency ideals and practices are shaping organizations in dramatic ways and that our desire for more transparency needs to include a desire to know its limitations.

Lars Thøger Christensen is Professor of Communication and Organization at the Department of Intercultural Communication and Management at Copenhagen Business School.

Pics by Roland Molnár and I Want a Poster, Flickr

Accountability, Communication, CSR, Featured, Governance, Issues, Models, News, Partnerships, Reporting

UN Global Compact Silently Expels More than 2,300 Non-Business Participants

By Andreas Rasche.

The UN Global Compact continues to “clean up” its participant base. The initiative reported to have 5,332 non-business participants (e.g., global and local NGOs and associations) in its October Bulletin, while its November Bulletin lists 2,983 active non-business participants. Hence, the Compact seems to have expelled more than 2,300 non-business participants for failure to submit the required “Communication on Engagement” report in the beginning of November. This is almost 43% of all non-business participants.

Non-Business Participants Delisted After Three Years

According to the Compact’s own “Communication on Engagement” policy, all non-business participants must submit a report every two years. The policy came into effect 31 October 2013. If participants do not submit such a report, they are labeled as “non-communicating” participants for another year. In other words, non-business participants that fail to submit a report are delisted after three years.

The Compact understands itself as a business-driven initiative, which, however, has clear links to NGOs, associations and also labor organizations. Non-business participants are vital actors, especially when considering the role of partnerships (SDG 17) and the general need for collaboration between business and society. Expelling more than 2,300 participants significantly undercuts the ability of the Compact to initiate and sustain such partnerships on a broader level.

Delisting as an Opportunity and a Problem

The delisting of non-communicating NGOs is a welcome move. It shows that the Compact takes its own integrity measures seriously and hence strengthens the accountability of the initiative. In the long run, the Compact will only thrive if businesses, NGOs, and, most of all, governments, trust it. And trust, as we all know, is not cheap; it must be earned over time.

However, this massive delisting also points to a significant problem: The Compact seems to rely too much on “growth by numbers.” Simply having over 5,300 non-business participants is useless, if 2,300 of them do not even dare to submit a rather basic report that outlines their activities in support of the initiative. I have said it before, and I will say it again: The Compact is too good of an idea to simply throw away. However, the value proposition of the initiative seems to remain opaque to most participants. The high number of delisted business participants (now reaching 7,500) and the impressive number of 2,300 delisted non-business participants (most of them being NGOs) question the “business model” that underlies the initiative. It may be time to rethink this model.

What Bothers Me Most is…

What bothers me most about all of this is: the Compact itself has not yet mentioned this massive delisting with a single word in its News section (as of 21 November 2016). Is such a massive loss of participants not a newsworthy event? We can read about all sorts of success stories in the News section, but the fact that the initiative expelled more than 2,300 non-business participants is not mentioned with a single word. The Compact itself promotes transparency (e.g. through Principle 10 on anti-corruption) and it should live up to its own ambitions by painting a fair and timely picture of the initiative. There is no reason to be ashamed of having to delist a high number of non-business participants, if the Compact learns the right lessons from this. No initiative is perfect and the Compact has come a long way. It has helped to mainstream corporate responsibility and sustainability, but it may also be in need of rethinking what value it creates for its participants…

Andreas Rasche is Professor at Copenhagen Business School and Director of CBS’s World Class Research Environment Governing Responsible Business. He has collaborated with the UN Global Compact on different projects and served on the initiative’s LEAD Steering Committee from 2012 to 2015. More information on: www.arasche.com

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Concepts, CSR, Featured, Knowledge, Models, News, Reporting, Research, Sustainability

Sustainable Business Model Research –Time to Leave the Twilight Zone

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By Dr. Florian Lüdeke-Freund.

Research on sustainable business models, or “business models for sustainability (BMfS)”, is still a niche topic in both the business model and sustainability communities. BMfS researchers often find themselves in a twilight zone, not knowing whom to address with or involve in their research. After one decade of BMfS research, it is time to develop a joint agenda to strengthen and shape this interdisciplinary field.

Leaving the Twilight Zone

Looking at seminal articles, we see that early work on BMfS deals with organisational and cultural preconditions of business models that contribute to corporate sustainability. Analysing business models is also seen as a means to overcome the technology bias of traditional eco-innovation approaches and move towards system level innovation, e.g. through product-service systems. Others see business models as tools to re-scale and re-localise monolithic industrial infrastructures, while again others investigate the links between business models and business success through corporate sustainability. Research on BMfS is often rooted in ecological sustainability, but some scholars see BMfS also as a means to address social issues.

These perspectives and topics clearly show that we need multiple disciplines, theories and methods to properly study BMfS. But reviewing the BMfS literature, which we have done in different projects and articles (Boons & Lüdeke-Freund, 2013; Schaltegger et al., 2016; Lüdeke-Freund et al., 2016), shows that we, as BMfS researchers, tend to talk to our “sustainability peers” only, in terms of how we frame and work on research problems and the journals we publish in. At the same time we are sitting somewhere in between. We are neither pure management scholars nor ecological economics veterans. We are in a twilight zone.

After one decade of BMfS research, it is time to step back and reflect on the topics we have studied, the theories we have used and developed, and the methods we have applied. We should ask ourselves, who – from outside our community – could help with the problems we are studying? Obviously, this is a multi- and interdisciplinary effort. Therefore, a joint, multi- and interdisciplinary research agenda and mutual exchange are required.

Towards a Joint Research Agenda

Our recent Organization & Environment special issue on BMfS covers a broad range of entrepreneurial, managerial and innovation issues. However, a lot remains to be done with regard to theory development and management support. Here, the original business model and the diverse sustainability communities could and should work together, develop projects and write articles that contribute to theory development and management support and are acceptable to their various audiences – including their respective journals.

The following exemplary research problems were identified in the editorial article of our special issue and could serve as a starting point for a joint research agenda for the original and the sustainability-oriented business model communities:

Theory development

  • How can theories on the organisational level (e.g. dynamic capabilities), individual level (e.g. responsible leadership) or on both levels (e.g. organizational learning) help explain green and social business model transformations?
  • How do BMfS co-evolve and trigger industry transformations both via market interaction and system transitions (e.g. evolutionary economics)?
  • Which learning-action networks and collaborations, but also power struggles between stakeholder groups, are involved in the creation of BMfS (e.g. stakeholder theory)?

Management support

  • Which management frameworks and instruments enable the management of and transition to BMfS (e.g. change management)?
  • Which frameworks and instruments can support innovation (e.g. design thinking, The Natural Step) and strategy implementation (e.g. Business Model Canvas) for BMfS?
  • How can performance and societal impacts be measured and managed on the business model level (e.g. balanced scorecard)?

These are just a few exemplary topics. But it is a starting point. It is also, or even much more, an open invitation to scholars from fields such as entrepreneurship, innovation, design, policy, and transition research, and many more, to develop a joint agenda that allows for true multi- and interdisciplinary BMfS research.

Our dynamically growing communities – e.g. Business Model Community, Sustainable Business Model Blog, Strongly Sustainable Business Model Group, Sustainability Transitions Research Network, Inno4SD – could benefit from such an agenda to progress in a more synergistic way, combining the best of these worlds: up-to-date knowledge about business model and sustainability research.

Such an agenda would shed some light on the twilight zone of BMfS research and would help to establish it as a research field in its own right.

Let’s start the conversation – now.

Florian Lüdeke-Freund is a senior research associate at the University of Hamburg, Germany. He is a research fellow at the Centre for Sustainability Management (CSM), Leuphana University, and the Governing Responsible Business Research Environment at Copenhagen Business School, Denmark. His research deals with sustainable entrepreneurship, sustainable business models, and innovation. Florian founded www.SustainableBusinessModel.org as an international research hub addressing sustainability, business model, and innovation topics.

Pic by Rod Serling’s classic anthology, The Twilight Zone (1959 – 1961)

Accountability, Communication, CSR, Environment, Ethics, Featured, Governance, Issues, Models, News, Reporting, Social

On CSR in ship recycling and textile sector supply chain management

By Karin Buhmann.

Dansk version nedenfor/Danish version below

Over the past weeks, news has emerged that Maersk, the world’s largest shipping company, which is based in Denmark, is having some of its container ships scrapped (cut up for materials to be recycled) under sub-standard conditions at beaches in India and Bangladesh. While Danish media have paid considerable attention to this and investors are asking critical questions of Maersk’s alignment between its CSR policies and practices, much less attention was paid to a case of severe critique of a Danish textile company that sourced from a supplier in the Rana Plaza building around the time of the building’s collapse.

What do these two cases have in common? More than one might expect, judging from the way they have been treated by media and business association statements. This applies with regard to business practices as well as research. But whereas one company’s understanding of due diligence appears very weak, the other displays a due diligence understanding that holds bigger promise for the longer term.

Company challenges in relation to risk-based due diligence

Both cases concern businesses’ exercise of risk-based due diligence. This is a process for businesses to avoid causing social or environmental harm. According to OECD’s Guidelines for Multinational Enterprises, enterprises should carry out due diligence to identify, prevent and mitigate actual and potential adverse impacts on human rights, industrial issues including labour standards, the environment etc. Enterprises should also carry out due diligence in relation to their suppliers and other business relations, to seek to prevent or mitigate adverse impact that is directly linked to their operations, products or services. This applies to yards scrapping ships as well as factories sewing clothing to be sold in stores in Denmark or elsewhere.

The Maersk case is an example of company that has problems walking its own CSR talk. But it is also an example of a company that has paid attention to the risks caused by its decision to scrap ships in India and taken certain steps to prevent such damage from occurring, suggesting due diligence has been exercised to a certain extent. However, the information that has emerged in recent weeks suggests that the due diligence process has not been adequately carried through from beginning to end of the activity in question. The textile case concerns a company that did not adequately carry out core due diligence elements in regard to its supplier in Bangladesh, where the prevalence of severe building safety issues was well-known already prior to the Rana Plaza collapse.

NCP: severe critique of Danish textile producer sourcing from Rana Plaza 

On October 17, 2016, the Danish National Contact Point (NCP) under OECD’s Guidelines issued a statement following a complaint concerning the practices of a Danish textile company in relation to, amongst others, occupational health and safety standards at the supplier in Rana Plaza. The NCP statement severely criticized the due diligence processes of the Danish company. Amongst others, the statement noted that the company neglected to make adequate requirements of the supplier in relation to a CSR policy; neglected to require the supplier to perform self-evaluation; and neglected to monitor and follow up on such self-evaluations.

This is the first time not only in Denmark but internationally that a public institution with expertise in CSR states specific critique of the due diligence processes of a company supplying from Rana Plaza. In view of the large number of casualties resulting from the collapse on 24 April 2013 and the subsequent attention that the tragedy has generated with media and consumers, one wonders why the critique of the Danish company has received such limited attention.

Press releases from business associations and the organization that lodged the complaint have highlighted the fact that the NCP did not pronounce the company accountable for the collapse (in some cases mistakenly communicated as ‘liability’ rather than accountability). Notwithstanding that the NCP’s powers do not enable it to attribute legal liability and the fact that the NCP made its assessment on the basis of documentation that it has been presented with or was able to investigate, that part of the statement has been allowed to dominate. The critique and the lessons on the importance of due diligence that the statement holds for Danish (and other) companies has received much less attention. Apart from the critique of the specific company, the NCP statement also underscores that it follows from OECD’s Guidelines that companies should require suppliers to protect their employees’ occupational health and safety, and that this responsibility today includes risk assessment in relation to building safety and integrity. From a research perspective it is surprising that business associations, despite differences in the way they have covered the issue, have not make more of an effort to explain the significance to their members.

Complexity and context

Ensuring responsible business conduct in chains of business relations is often complex. Turning talk (or policies) into walk (or practice) is frequently challenging in view of the conditions in some of the countries from which Danish companies supply textiles, or where ships are scrapped. Poverty and local socio-economic conditions lead to employees accepting salaries and working condition far below international standards. Unfortunately, these problems are rarely solved overnight. Implementing norms for occupational health and safety does not just require the relevant rules to be in place, but also that they are communicated and explained to employees and managers, and that qualified training and monitoring takes place. Changing dangerous working methods or buildings requires not just investment, but also time and attention. And as in other fields, perfection requires practice.

Outlook

Maersk has a CSR problem because its ship scrapping practices are not in accordance with the company’s own standards. Yet, Maersk has also demonstrated awareness of risks. When Maersk decided to have ships scrapped at the Alang beach in India, it was also decided to take on three employees to monitor the observance of Maersk’s standards. This suggests a degree of due diligence.  However, due diligence is a continuous process. The Alang-case demonstrates that having employees in place to monitor observance of standards is not sufficient, if this is not followed by processes to ensure that the monitoring identifies the problems it is intended to find. The related case of ships previously owned by Maersk now being scrapped on beaches in Bangladesh demonstrates the significance of also incorporating risk-based due diligence in relation to economic stipulations incorporated into contracts.  However, the Maersk case also offers an example of a company that is working on practicing to walk its talk. The commitment to improve and to internal learning expressed by Maersk in follow-up to the media reports and investor critique raises more hope for the implementation of due diligence than does the reception of the critique of the textile company.

Om samfundsansvar i skibsophugning, tekstilsektoren, og om at tage ansvar alvorligt og øve sig

I ugen med efterårsferien meldte investorer sig med spørgsmål om ophugningen af udtjente Mærsk-skibe på strande i Indien og Bangladesh, og mediernes interesse for sagen fortsatte. Derimod fik en alvorlig kritik, som er blevet udtalt over en dansk tekstilvirksomhed, der fik syet tøj hos en leverandør i Rana Plaza bygningen omkring tidspunktet for bygningens sammenstyrtning i 2013, ganske begrænset opmærksomhed i pressen.

Hvad har de to sager til fælles? Mere end man skulle tro fra den måde, de er blevet behandlet i medier og meddelelser fra erhvervsorganisationer. Det gælder både praktisk og forskningsmæssigt.

Begge sager handler om virksomheders risikobaserede due diligence (på dansk somme tider oversat ’nødvendig omhu’, som ikke skal forveksles med ’rettidig omhu’). Risikobaseret due diligence er en proces til at sikre, at en virksomhed undgår at forvolde skader på mennesker og miljø. Ifølge OECDs retningslinjer for multinationale virksomheder, som Danmark har tiltrådt, skal virksomheder udføre risikobaseret due diligence for at undgå og modvirke skade på miljø, menneskerettigheder, arbejdstagerrettigheder mv. Virksomheder skal også udøve due diligence i forhold til deres leverandører og andre forretningsforbindelser. Det gælder både værfter, der hugger skibe op, og systuer, der laver tøj til danske herretøjsbutikker.

Mærsk-sagen viser en virksomhed, som har haft problemer med et leve op til sine egne standarder og politikker om CSR. Men det viser også en virksomhed, som har været opmærksom på sin mulige skadesrisiko og taget skridt til at modvirke det. Det er udtryk for due diligence. De oplysninger, som er kommet frem de seneste uger tyder på, at virksomhedens due diligence ikke har været ført tilstrækkeligt igennem. Mere om det senere. Tekstilsagen handler om en virksomhed, som ikke løftede en række centrale elementer i due diligence i forhold til sin leverandør i Bangladesh, hvor det allerede inden Rana Plaza styrtede sammen var kendt, at der var alvorlige problemer med bygningssikkerhed og ansattes arbejdsforhold.

Det danske nationale kontaktpunkt for OECDs retningslinjer for multinationale virksomheder offentliggjorde mandag i uge 42 en udtalelse på baggrund af en klage over en dansk producent af herretøjs håndtering af bl.a. sundheds og sikkerhed på arbejdspladsen hos virksomhedens leverandør i Rana Plaza. Kontaktpunktet (som på dansk kaldes Mæglings- og Klageinstitutionen for Ansvarlig Virksomhedsadfærd eller bare MKI) udtalte alvorlig kritik af den danske virksomheds processer for risiko-baseret due diligence. Det blev bl.a. kritiseret, at virksomheden ikke i tilstrækkelig grad stillede krav til leverandøren i form af en CSR-politik; og ikke i tilstrækkelig grad anmodede leverandøren om selvevaluering og gennemgik selvevalueringer med henblik på at fastslå, hvad der skulle kontrolleres og følges op på.

Det er ikke bare i dansk sammenhæng men også internationalt første gang, at en offentlig autoritet med ekspertise inden for CSR-feltet udtaler konkret kritik af en virksomhed, der fik produceret på Rana Plaza. I betragtning af det store antal mennesker, der omkom eller kom til skade, da bygningen styrtede sammen den 24. april 2013 og i betragtning af den interesse, som Rana Plaza-tragedien har haft blandt medier og forbrugere kan det undre, at kritikken af den danske virksomheds due diligence fik så lidt opmærksomhed.

Pressemeddelelser fra erhvervsorganisationer og den organisation, der indgav klagen, har i stedet fremhævet, at kontaktpunktet ikke fandt virksomheden ansvarlig for sammenstyrtningen. Uden skelen til, at kontaktpunktet ikke har kompetence til at pålægge juridisk ansvar og kun har forholdt sig til de oplysninger, det har fået dokumenteret eller haft mulighed for at undersøge ift hvad en kontrol kunne have vist, har denne del af udtalelsen fået lov at dominere. Det, som danske virksomheder bør skrive sig bag øret om krav om due diligence, har fået meget mindre opmærksomhed. Udover den alvorlige kritik af tekstilvirksomheden fastslår udtalelsen også, at virksomheder for at leve op til principperne i OECD’s retningslinjer bl.a. skal stille krav til leverandører til at sikre sundhed og sikkerhed på arbejdspladserne. Denne forpligtelse omfatter i dag også risikoafdækning af bygningskonstruktioners sikkerhed. Selv om der er forskelle i dækningen fra forskellige organisationer, er det fra en forskningsmæssig CSR-betragtning tankevækkende, at erhvervslivets organisationer ikke i højere grad har grebet muligheden for at forklare deres medlemmer, hvor vigtigt dette er.
Ansvarlig virksomhedsadfærd i kæden af en virksomheds forretningsforbindelser er ofte komplekst. Der kan være langt fra idealer og politikker til den praktiske virkelighed, der gælder i lande, hvor danske virksomheder får produceret tekstiler, eller hvor skibe ophugges. Fattigdom og lokale samfundsøkonomiske forhold er ofte årsagen til, at mennesker sælger deres arbejdskraft for løn og arbejdsbetingelser, der ligger langt fra internationale standarder. Problemerne kan desværre sjældent løses fra den ene dag til den anden. At gennemføre normer for sundhed og sikkerhed på arbejdspladsen kræver ikke bare, at regler findes, men også at de formidles til de ansatte og deres ledere, og at der foregår en solid oplæring og kontrol. At ændre farlige arbejdsmetoder eller bygninger kræver ikke bare investeringer, men også tid og opmærksomhed. Og som ved andre vanskelige opgaver kræver perfektion øvelse.

Mærsk har et problem med manglende overensstemmelse mellem sine egne standarder og deres gennemførelse. Men Mærsk har også vist, at man er er opmærksom på at udvise due diligence. Da Mærsk besluttede at få skibe ophugget på Alang-stranden i Indien, besluttede man samtidig at ansætte folk til at kontrollere, at Mærsks standarder blev overholdt. Det er udtryk for due diligence. Men risikobaseret due diligence er en løbende proces. Alang-sagen viser, at det ikke er nok at placere kontrollører, hvis man ikke også har processer for at checke, at kontrollerne fanger de problemer, som de skal. Sagen om ophugning af tidligere Mærsk-skibe på strande i Bangladesh viser, at due diligence også bør gennemsyre en virksomheds økonomiske betingelser, der indgår i kontrakter. Men Mærsk-sagen viser også en virksomhed, som kan siges at være i gang med at øve sig. Den vilje til forbedring og intern læring, som Mærsk har givet udtryk for, giver grund til større håb for gennemførelse af risikobaseret due diligence end den, som tekstilsagen er blevet modtaget med.

Karin Buhmann har fornylig været på TV2 for at diskutere Mærsks kontroversielle skrot politik og CSR.

Karin Buhmann is Professor (mso) in Business & Human Rights at the Department of Intercultural Communication and Management at Copenhagen Business School.

pic by by Mike Hettwer,  National Geographic