On 20 November, the FIFA World Cup in Qatar is opening its doors. Billions of football fans around the world will tune in and watch this mega sport event. As we are getting closer to the opening match, I am often being asked whether I believe it is responsible to watch the World Cup or whether it is better to boycott the tournament. Here is my personal assessment.
Human Rights Problems – More Than Labor Rights Violations
While the labor conditions of migrant workers in Qatar have attracted most media attention, the human rights problems go much further. Journalists are thrown into jail while covering stories around working conditions, the LGBTQ+ community is subject to ill-treatment, and women’s rights are still significantly curtailed.
Those arguing that the country made progress in terms of human and labor rights have a point. The kafala system – a system leading to the exploitation of migrant workers that can potentially give rise to forced labor – has undergone some reform in 2020, however, this is ten years after the country was awarded the World Cup and it only happened after significant pressure. It is also true (and noticeable) that Qatar is the first country in the Arab Gulf region to have made such changes.
But should we celebrate this as an achievement of the World Cup taking place in the country? Following this logic, we should award countries that limit human rights mega sport events in the future hoping that these countries may agree to reforms that are long overdue. Also, who tells us that Qatar will keep making progress in terms of human rights after the World Cup has ended and media attention has vanished?
Just a few days ago, one of the official World Cup ambassadors, Khalid Salman, talked about gay people in an interview with German television. He mentioned that “We will accept that they come here. But they will have to accept our rules.” He then moved on claiming that gay people are “damaged in their mind.” At this stage, a spokesperson of the World Cup organizing committee (who was shadowing the reporter while being in Qatar) stopped the interview.
Some supporters of the Qatar World Cup argue that we did not “make such a fuzz” when the tournament took place in Russia in 2018, just four years after the illegal annexing of Crimea. In 2018, Russia faced significant human rights challenges, some of them very similar to the ones of Qatar (e.g., lack of freedom of speech and ill-treatment of LGBTQ+ community). While it is difficult to directly compare both cases (e.g., labor conditions were not that debated back then), it would be misleading to justify one problematic mega sport event through lack of attention to another one.
A Corrupt Bid
One of the strongest controversies around the World Cup has been around whether the bidding process was influenced by corrupt behavior, a claim that Qatar has long denied. However, a longstanding investigation of the U.S. Department of Justice claimed that representatives working for Qatar and Russia bribed FIFA officials ahead of the 2010 bid.
In 2020, the New York Times reported that three South American officials received payments to vote in favor of Qatar and Russia according to the indictment. In the end, Qatar defeated the U.S. in the bidding process. At the time of the vote, the FIFA committee was already diminished by two members who were secretly filmed while agreeing to sell their votes.
Of course, Qatar is not the only country to have won a World Cup through a corrupt bidding process. Investigations revealed that Russia’s bid for the 2018 World Cup was also linked to bribes, and the German World Cup in 2006 was also allegedly linked to dubious payments. Yet, we cannot legitimize or downplay corruption in the case of Qatar by reference to prior corrupt practices during World Cup bids. Grand corruption was and is a deeply problematic practice, regardless of where and when it occurs. No-one is suggesting to bar countries that are known for higher levels of corruption from future World Cup bids. What is needed are stricter compliance rules and better oversight.
The Net-Zero Winter World Cup?
The decision to move the World Cup to November/December was made so that players do not have to play in the middle of the unbearable summer heat. FIFA estimates say that the World Cup will produce 3.6 million tonnes of carbon dioxide during the tournament, which is about the carbon footprint of a smaller country. By comparison, the World Cup in Russia produced 2.1 million tonnes. It is uncertain whether we can actually trust these figures. A report by Carbon Market Watch suggested that the emission figures associated with the construction of the new stadiums are vastly underestimated due to the methodology used by Qatar.
Where do the emissions come from? Contrary to popular belief, stadium air conditioning does not contribute the lion’s share of the overall emissions. Emissions mostly come from the need to build totally new infrastructure (incl. housing and ground transport) and to get fans to Qatar (which is for many fans only possible via plane). Given that the U.S. (the main competitor in the bid) already had most of this infrastructure, makes the decision to place the World Cup in Qatar seem even more strange from an environmental perspective.
Qatar has promised the “first carbon-neutral World Cup in history”. However, so far only 1.8 million tonnes of carbon have been offset, and experts have argued that the quality of the carbon credits is low, for instance due to problems associated with additionality.
The problem with net-zero mega sport events is not only the credibility of the claim. It gives the false impression that we can build huge stadiums and fly in people from all over the world, and that all of this is somehow compatible with reaching Paris-aligned climate goals.
To summarize, we have placed the World Cup into a tiny desert state that significantly and systematically harms basic human rights, that has moved the World Cup final near Christmas to avoid the extreme summer heat, and that has allegedly won the bidding process through corrupt behavior.
Importantly, only pointing the finger at Qatar may be too easy, some of the problems reflected through the World Cup are part of much bigger problems surrounding football as such, most of all its extreme dependency on money.
I am a football fan, and I will miss the matches, but I am also a fan of human rights, environmental protection, and anti-corruption. Football is for everyone and not just for those a repressive regime deems worthy. So, I rather stay away from the matches and instead spend time playing football with my son. In the end, the World Cup in Qatar will not have a true winner, because sustainability already lost…
By Milena Bar, Ottilia Henningsson, & Dr. Kristjan Jespersen
◦ 5 min read◦
The Science-Based Targets initiative aligns firms’ emission reduction targets with a net-zero emissions pathway. Firm commitment yields significant abnormal returns which are larger for firms committed to larger emission reductions and for high-emitting firms.
The IPCC’s sixth assessment established a code red for humanity and provided mounting evidence of widespread, rapid, and intensifying climate change. The Paris Agreement, ratified by over 190 states and non-state actors in 2015, formally stipulated the goals of limiting global warming to ideally 1.5°C and at a minimum well below 2°C with the aim of reducing the most catastrophic damages related to climate change onto the natural environment, human health and global financial market. The need for climate action is urgent and requires engagement from governments, individuals as well as corporate and investor participation.
Incentivizing corporations and investors to act voluntarily on climate change is critical to redirect private capital towards environmentally responsible business practices. The Science Based Targets initiative (SBTi) is becoming the global standard for firms seeking to set emission reduction targets aligned with the required global decarbonization targets established in the Paris Agreement. By encouraging voluntary corporate carbon emission reductions, the SBTi is a critical tool to reduce the private sector’s reliance on fossil fuels.
2021 record year for new approved targets and committing firms for SBTi
Since its founding, just seven years ago, SBTi has experienced exponential growth in the number of committing firms and has mobilized firms representing more than a third of global market capitalization to reduce their carbon emissions. In 2021 the initiative took steps to increase the ambition level of firms’ emission reduction targets. When first established, firms could commit to reduce their emissions either aligned with the reduction targets of 1.5°C or 2°C. However, from summer 2022, the initiative will only be accepting the more ambitious emission reduction target, as set out in their campaign Business Ambition for 1.5°C.
Since company engagement ultimately comes down to whether committing to SBTi will drive wealth for shareholders, understanding the stock market response to firm commitment to the SBTi is essential not only for businesses looking to commit, but also for investors. To justify the integration of a climate credential such as the SBTi in investment management, it needs to be able to provide excess returns. To understand the stock market reaction to firms’ announcement of SBTi commitment, we conducted a short-horizon event study on a portfolio of 1.535 firms.
Firm commitment to the Science Based Targets initiative aligns environmentally sound practices with financial viability
Firm commitment to the SBTi indeed yields a positive announcement abnormal return and thus speaks to the credibility of SBTi in constituting a credible signal of firm commitment to sustainable business practices. Even more encouraging is the finding that firms committed to the 1.5°C target experienced substantially higher returns, indicating a stronger positive market reaction when exhibiting a higher cost of commitment and higher target ambition level. The market evidently differentiates between ambition levels by rewarding businesses that are pledging themselves to more demanding emission reductions and a more climate-friendly business strategy. These findings are particularly relevant in light of the SBTi making the more stringent emission reduction target the new standard for all firms via their campaign Business Ambition for 1.5°C and may encourage more firms to increase their efforts in reducing their greenhouse gas emissions.
Stock price reaction in response to commitment to the Science Based Target initiative
In turn, high carbon emitting firms, proxied here by firms identified by the CA100+ list, reaped the largest reward in their stock price following commitment. This finding further confirms the market’s more sensitive reaction to costlier commitments, but also creates concern about whether the SBTi may have to rethink a recent strategic decision. The SBTi announced that they will not be accepting targets set by firms operating in the Oil and Gas industry, thus abandoning the industry specific methodology for fossil fuel firms which had been in development for several years. Fossil fuel firms have a key role to play in successfully achieving the goals of the Paris Agreement, thus begging the question of whether the SBTi is not missing out on covering an industry critical to combatting climate change and a sector of firms who are highly rewarded by the market for committing to reduce their emissions.
As climate disasters become more prevalent and more severe, firms who fail to transition to a low, or zero, carbon business model can be expected to become more vulnerable in the long run. To expand the analysis, we further tested the performance of a portfolio strategy screened for firms committed to the SBTi. Despite the underperformance of an SBTi screened portfolio against a portfolio consisting of only non-committed firms in the medium-term, there is reason to believe that a portfolio with SBTi committed firms may provide higher returns in the future. Given that SBTi commitment represents a commitment to aligning the firm’s operations with the net-zero emissions pathway, it can be perceived as a safer bet in the long run. Moreover, portfolios consisting of SBTi firms were shown to be characterized by lower volatility. The objective of investors is shifting to increasingly sustainable and impact focused investment profiles, hence portfolio and asset managers may use SBTi commitment as a filter in security selection to achieve their client’s demand.
Looking Ahead
Financial institutions have a key role to play in driving systematic economic transformation towards a global net-zero carbon emissions economy in their power to lend and invest. As evidenced, firm commitment, ambition level and cost of commitment are reflected in the stock’s pricing mechanism, making the business case for the firm to set ambitious targets for decarbonization, and providing rationale for investors to in the short run utilize the market’s reaction to firm commitment in investment processes and strategies.
About the Authors
Milena Bär is a recent graduate in MSc Applied Economics and Finance and is working as a student researcher in ESG and Sustainable Investments at Copenhagen Business School. Her research projects are mainly within the field of ESG metrics and regulation, with a focus on the investor’s side.
Ottilia Henningsson recently graduated with a MSc in Applied Economics and Finance from Copenhagen Business School with a keen interest in the transition towards a more sustainable financial industry.
Kristjan Jespersen is an Associate Professor at the Copenhagen Business School. He studies on 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.
Russia’s invasion of the Ukraine reminds us that corporate social responsibility (CSR) is both a reflection of the times we live in and also dynamic! Numerous corporations, acting in response to social and political pressure, are withdrawing from Russia on the grounds that human rights, and a nation’s rights, are being trampled on. This is not to say that these decisions necessarily come easily: there may be ethical, strategic, stakeholder and political tensions. But the point is that perhaps the most basic societal issue of war and peace – and its governance – enters CSR agendas. Ethical investors are even considering the defense industries as suitable for their assets.
In recent decades several challenges have emerged which appear to move CSR from a relative comfort zone of discretionary activities to more core societal governance challenges, some of these manifestly involve some corporate culpability (e.g. the 2008 financial crisis, international supply chain labor abuses, climate change, ecological degradation), others like international pandemics, war and international health and welfare challenges reflected in the UN Sustainable Development Goals, may reflect wider causes. Nonetheless, corporations claim some responsibility for these issues. Even corporate ‘talk’, as well as ‘walk’, contribute to the redefinition of CSR to take in core societal governance challenges.
This is understood as right and proper from some perspectives. Medieval corporations were established precisely to achieve public ends – often of basic infrastructure. Industrial corporations were pioneers of C19th health, welfare and education systems. In many developing countries corporations take responsibility for physical security of their employees and communities.
But in the late C20th a view took hold that this was somehow inappropriate. Milton Friedman’s famous 1970 critique of CSR was precisely on the grounds that corporations are not accountable for addressing such issues: governments are. Many CSR advocates, whether fearing a corporate takeover of government or vice versa, and have advocated a dichotomy between the responsibilities (social and economic) of corporations and those of governments.
Yet the last twenty years have witnessed two related phenomena which challenge the dichotomous view. First, corporations have chosen to engage in social and environmental agendas which are core for national and international governments (e.g. human rights, corruption, access to resources), whether in response to pressure or by virtue of their own ethical or strategic judgement. Secondly, governments have encouraged corporations to enjoin public efforts, through their policies of endorsement and cajoling, financial incentives, partnerships and even mandates (e.g. for energy markets, non-financial reporting, supply chain due diligence).
Governments have recognized the distinctive resources that corporations can bring to governance questions (e.g. to innovate, to experiment, to reach beyond national boundaries, to collaborate). Interestingly in cases of mandate, governments often cede to corporations discretion as to how, rather than whether, to comply. Thus, for example, corporations can choose whether to cynically comply with international weapons sanctions on a country to sell arms by the legal use of third parties to effectively maintain the sales OR to embrace the spirit and intention of the sanctions and uniformly cease the sales to the regime in question.
But Friedman’s critique nags and critics of corporations point to unaccountable corporate power through lobbying and informal influence. Corporations lack a traditional democratic mandate. We elect MPs and governments, but not CEOs. So is engagement with public policy (rather than legal compliance) really the business of corporations?
My short answer is ‘yes’ on the grounds that businesses are members of society and that corporations are afforded particular privileges by the state, and thus have clear public duties. But the situation is not satisfactory. In most democratic jurisdictions corporations’ roles ‘to make’ and ‘to take’ regulation are not clearly specified and thus their accountability is unclear. Moreover, new international multi-stakeholder initiatives which tie corporations in with each other and with civil society often fail to effectively regulate errant organizations.
So we have a challenge which is about CSR and politics: how to better build corporations into political institutions? I suggest that the challenge is shared – for corporations to review their political participation to ensure that it is citizenly; for civil society to engage in defining how corporations can be more accountable and to engage more directly in corporate accountability (perhaps with support from government?); and for governments to review how accountably corporations influence and respond to regulation.
About the Author
Jeremy Moon is Professor at Copenhagen Business School, and Chair of Sustainability Governance Group. 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.
Introduced by Thaler and Sunstein in 2008, nudges have become popular policy tools to change the behaviour of consumers and citizens in desirable ways without compromising their freedom of choice. Their success in public policy domains has sparked the interest of management teams to apply nudges in organisations as means to guide the decisions of employees. However, in comparison to the ever-growing literature on the use of nudges in the public sphere, relatively little is known about their applicability at the workplace.
More and more organisations are pursuing corporate social responsibility and sustainability strategies, for which changes in workplace behaviour are key. Nudges can help organisations promote the needed behavioural change in relevant domains, such as employee health, energy conservation, green transportation, waste management, ethics and diversity, to name just a few. A number of studies report, for example, success in promoting healthier food choices of employees through alterations in the choice architecture of workplace canteens. Other nudging interventions have led to reductions in electricity use by providing feedback to employees on the desirable behaviour of peers. Regarding workplace diversity, evaluating job candidates jointly rather than separately has proved to promote gender-mixed teams. Further, in the ethical domain, honest employee behaviour appeared to rise by reminding people about their shared moral values at critical decision points.
The mentioned examples provide an idea of the potential of nudges as cost- and time-efficient alternatives to traditional organisational intervention tools that mostly involve trainings and sanctions with limited success. A key advantage of nudges is their behaviourally informed approach, acknowledging the role of unconscious decision processes that often contradict people’s good intentions.
By altering the choice environment rather than trying to rewire the human brain, nudges can steer employees to desirable behaviours while preserving their freedom of choice.
Just recently, the United Nations Behavioural Science Week has convened experts from international agencies, governments, academia and the private sector to discuss about these possibilities. However, what has also been recognised, as much as workplace nudging involves opportunities, it comes with challenges that need to be addressed.
The first question that one might ask is how nudging individuals inside organisations for specific concerns leads to impactful organisational change in line with strategic corporate goals. Theory tells us that this is possible indeed by nudging a significant amount of employees. Organisations are made up of people. When enough people are nudged to alter their behaviour in a specific way, the new behaviour has the potential to become a norm, i.e. a rule for expected and accepted behaviour. Once embedded in the culture of an organisation, people are likely to conform to the new norm, so that organisational behaviour changes as a whole.
This idea comes with a caveat though. Organisations are complex social constructs with formal and informal components of organisational culture conveying a variety of messages to employees. A gentle nudge might thereby not be strong enough to induce the desired behavioural change. Signals elsewhere in the organisation could simply counterbalance the effect of a choice-preserving nudge. Typically, nudges are designed and tested for very specific instances of human behaviour. What works in one context might not work in another one, sometimes even resulting in unintended consequences. Clarifying the effectiveness of nudges is difficult in complex organisational settings, particularly regarding their impact in the longer term. This requires consequent piloting and testing over considerable periods of time, allowing for a flexible and adaptive approach to a particular setting.
Contrary to the idea of nudges being top-down policy tools, successful intervention implementation in complex organisational choice environments requires the active contribution of employees. The latter should be consulted about their needs, involved in the design of nudges and informed about the intervention implementation. A high degree of transparency is also necessary to ensure the acceptance of nudges by employees.
Another aspect to keep in mind is that widespreadorganisational change, such as switching from a solely profit-oriented corporate performance to a more encompassing economic, social and environmental one, cannot be addressed by nudges alone.
Complex organisational problems need to be broken down into micro pieces, suited to be managed by a variety of measures and instruments. Not all of the resulting aspects will have human behaviour at their core. Some might be fundamentally technological in nature, requiring innovative technical solutions. For those problems that remain to be behavioural, the ones that involve serious risks will always call for stringent enforcement tools. Others, however, might be better addressed through a voluntary, trust-based approach. This is where choice-preserving nudges come into play. Clearly, a single nudging intervention can only address a very specific concern. The wider organisational success depends on the aggregate of multiple nudges as well as their interplay with other policies. Measures ultimately need to send consistent messages about desirable behaviours, aligned with an organisation’s broader strategic goals. By influencing organisational culture in an encompassing way, widespread organisational change will gradually take place.
Venema, T., & van Gestel, L. (2021). Nudging in the Workplace. In R. Appel-Meulenbroek, & V. Danivska (Eds). A Handbook of Theories on Designing Alignment between People and the Office Environment.
About the Author
Leonie Decrinis is PhD fellow at Copenhagen Business School with research interests in corporate social responsibility, sustainability governance and behavioral sciences. Her PhD project focuses on applying behavioral insights to corporate sustainability in order to align governance objectives with organizational behavior.
It is both a bit weird and a great honour to be invited to reflect on our paper, “Corporate Social Responsibility (CSR) in Asia: A Seven Country Study of CSR Web Site Reporting”. The process has given us a chance to reflect on what we knew then, what we know now, and how much things have evolved. Our reflections cover memories of the context and origins of the paper; the data available – and unavailable – to us at the time; the approach we took – and what we see as its virtues – and the results; and the relevance of the paper to CSR in Asia today – nearly twenty years on.
As is often the case, the origins of a well-known paper are curious. Our paper grew from the internationalization strategy of the University of Nottingham (UoN) where we then worked in the International Centre for Corporate Social Responsibility (ICCSR). UoN had opened a campus in Malaysia and was opening another in China. So, the Vice-Chancellor encouraged us to engage with our colleagues there …which made us think that we should probably know a bit about Corporate Social Responsibility (CSR) in Asia … hence the paper. Little did we know what this would lead to!
Thanks to the ICCSR, we had the funds to employ researchers with whom we analyzed web site reporting of 50 companies’ CSR in seven Asian countries: India, Indonesia, Malaysia, the Philippines, South Korea, Singapore, and Thailand (bringing a range of business systems in terms of size, religion and culture, political system, and economic development). Hang on, you say, what about China? Our answer is simply that at that time there were barely any Chinese MNCs with English language website reporting… which is certainly not the case now! Although our choice of sample skewed the population to the larger companies with a strong international business profile, this did not concern us as it strengthened the testing of the CSR-shaping role of national business systems.
We focused on broad CSR waves, i.e. community involvement, socially responsible production processes, and socially responsible employee relations. Whilst it enabled broad generalizability of the character of CSR nearly twenty years ago, it does raise some questions of compatibility with current CSR agendas in Asia. However, the more inductive identification of component CSR issues (e.g. community development; education & training; health and disability; environment) makes the findings amenable to temporal comparison, providing a more fine-grained analysis of activity within the waves. We also focused inductively on the dominant CSR modes (i.e. how the issues were addressed). This is when things got interesting. We started to see distinctive country patterns emerge in terms of issues within the waves (e.g. community issues were particularly prominent in India, Thailand, Malaysia and the Philippines, but less so in the other three countries), but this was not the case in the modes. The modes deployed within each of the waves were strikingly similar: philanthropy dominated community investment, and codes and standards dominated production processes. In other words, the “what” rather than the “how” was nationally distinctive.
Some conclusions now seem uncontentious, most obviously that ‘community involvement’ is the CSR priority in Asia. Similarly, there is no “Asian CSR” model, but a set of nationally distinctive patterns of CSR behaviour, resulting from the national business systems, rather than development. Reflective of the impact of globalization on CSR, we found that companies operating internationally were more likely to adopt CSR than those operating only in their home country. One might expect that international exposure might lead to an increase in similarity of approaches across countries; however, we instead found that the CSR of the multinational companies operating in Asian countries tended to reflect their host rather than their home countries, reinforcing the national distinctiveness. However, this finding may be a little simplistic in the light of emerging tensions between international CSR approaches and host country experiences.
It is great to see that CSR in Asia has attracted a volume of research and we are delighted that our paper has been a reference point for some of this research.
Jeremy Moon is Professor at Copenhagen Business School, and Chair of Sustainability Governance Group. 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. He is the Project Lead of the RISC research project.
Wendy Chapple is a full Professor of International Business and CSR at the Vienna University of Economics and Business (WU Vienna). She has played central roles in programme design and development, designing CSR related programmes and has been programme director for MSc and MBA programmes in CSR in the UK. Wendy gained recognition for the development of faculty, programmes and research, by winning the Aspen Institute faculty pioneer award in 2008. At WU, she will contribute CSR and Sustainability modules to the CEMs and undergraduate programmes.
By Lisa Bernt Elboth, Adrian Rudolf Doppler, & Dr. Kristjan Jespersen
◦ 5 min read◦
Institutions not only structure any sort of social interaction [1], but are also essential in solving societal problems [2], such as climate change and the associated threat towards a fair and just future. It is not without reason that the United Nations particularly emphasized institutional progress within SDG 16 [3] to advance to a more effective, inclusive, and accountable society. In a recent study, it was found that institutions matter to a great extent when scrutinizing the relationship between corporate financial performance (CFP) and ESG performance. More specifically, the institutional environment a company finds itself in determines whether sustainable business practices get transformed into financial returns.
The claim that more sustainable companies are outperforming their not so sustainable peers is not new [4] and the consequent shift of investors’ preferences towards more sustainable companies has been taking place with increasing speed over the last decade [5]. Associated wake-up calls and the urge to take ESG into consideration are not surprising either. Besides the alleged desire of investors for a just and sustainable future, this shift is more likely based on the theory that sustainable finance delivers abnormal returns [6]. But is the relationship between sustainable behavior and financial performance as straightforward as it is disseminated? Are more sustainable corporations indeed more likely to achieve better financial results regardless of where they are and what they do?
In fact, when utilizing ESG scores, rankings, and performance as a proxy for sustainable behavior, two meta-analyses [7] [8] concluded that in most empirical studies the resulting relationship was not as simplistic, universal or linear as it is often propagated. In a corresponding literature review, the researchers also identified a large number of discrepancies among scholars in how to statistically model the relationship, what control variables to use and how to even quantify the dependent and independent variables of focus. Following these insights, the researchers uncovered a determining factor in establishing and shaping the emphasized relationship – institutional quality.
Key Findings
The final sample consisted of datapoints from 6,976 corporations, situated in 75 different countries over a period of eleven years or, specifically, from 2009 to 2020. Subsequently, these were analyzed applying fixed effects panel regression models. Both an accounting- and a market-based measure were used to quantify corporate financial performance, respectively, Return on Assets (ROA) and Tobin’s Q. Meanwhile, ESG performance was proxied by ESG scores from Refinitiv (former Thomson Reuters). The variables associated with institutional environment were split into
Institutional Quality, calculated through a factor analysis and based on the World Governance Indicators from the World Bank and
Industry Sensitivity, a dummy variable equal to 1 if the GICS industry of a firm was deemed sensitive towards ESG.
Institutions are among the determinantal factors for the link
Interestingly, the general statistical analysis of ESG and CFP did not yield any significant results, however, when moderating effects stemming from the institutional environment were introduced, this changed. Under high institutional quality, the researchers found a positive relationship between ESG scores and financial performance. Contrarily, the relationship was negative under low institutional quality. Exemplified below by the case of Finland 2012, Argentina 2018 and Zimbabwe 2012, institutions can be seen as the determining factor for direction of the focal link. Furthermore, the industrial environment a corporation finds itself in was found to affect the relationship ambiguously. Generally, sensitive firms seem to receive relatively less financial gain for improved ESG performance, and it may even be negative.
Possible explanations for such dynamics
Legal institutions, such as environmental regulations, labor laws or health and safety requirements, can serve as the means of reflecting sustainable behavior inside a company’s balance sheet. Finland was for instance the first country to introduce a carbon tax capturing corporate pollution by giving it a price and hence affecting accounting profits.
In highly corruptive settings, where the trust of the general public is lacking, the likelihood of sustainable activities being perceived as greenwashing and thus not rewarded by investors, could be another reason for an inverse relationship in low institutionally developed regions.
In line with the previous, when accountability is low, and corporate entities can disclose information without third party verification, it could be relatively easy to stay focused on short-term profits through unsustainable practices but still receive a better ESG rating.
In environments with low institutional quality, banks tend to only give out short-term loans in order to reduce their own risks. This can lead to a vicious cycle of corporate lenders also only focusing on short-term profit maximization which then again decreases their access to capital, constraining their ability to engage in long-term sustainable practices.
Putting the SO WHAT into practice
When setting out for systemic change, it is important to ensure the necessary institutional environment in order to encourage individuals, as well as corporate entities to act in the best interest of the entire society and the planet. Thereby, a bottom-up approach focusing on incentivizing every individual and a top-down approach, fostering legal macro-level change can be synthesized, leading to the best possible outcome. These institutions should seek to maximize accountability, transparency, and mechanisms to internalize negative externalities. Corporations within such environments should fully leverage opportunities associated with sustainable practices, such as cheaper access to capital, in order to incrementally advance the progress towards a just space for humankind. Corporations, which are especially sensitive towards ESG related elements irrespective of their ESG scores, should aspire to enhance their own credibility, as this might award them with a competitive advantage. Lastly, societies with high institutional quality should strive for teaching about their institutions and the associated benefits to everyone else, as a global problem can only be solved on a global level.
References
Doppler, A.R., & Elboth, L.B. (2022). Institutional Quality, Industry Sensitivity and ESG: An Empirical Study of the Moderating Effects onto the Relationship between ESG Performance and Corporate Financial Performance (Unpublished master’s thesis). 22098. Copenhagen Business School, Denmark.
About the Authors
Lisa Bernt Elboth recently graduated with an M.Sc. in Applied Economics and Finance as well as a CEMS Master’s in International Management from Copenhagen Business School and Bocconi University. Her interest in global matters and sustainability has flourished during her studies impacting the choice of master thesis topic and this subsequent blog contribution.
Adrian Rudolf Doppler works as a research assistant for the Department of International Economics, Government and Business at Copenhagen Business School and had just graduated with a Master’s in Applied Economics & Finance and the CEMS Master’s in International Management after a two-year journey. He had always been passionate about ESG, Sustainability and the existing links with the capital markets, as well as the complex system dynamics arising form it.
Kristjan Jespersen is an Associate Professor at the Copenhagen Business School. He studies on 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.
Summary of the discussion with Sophia Opatska at CBS
◦ 8 min read◦
This blog post is a repost and has first been published by UCU Business School on 5th of April 2022.
In normal life, I am a vice-rector for the strategic development of the best Ukrainian private nonprofit University and founding dean of UCU Business School. Right now, I am one of 4 million Ukrainians who left Ukraine because of bomb shelling and war, which Russia started on February 24th.
Sophia Opatska, 2022
What happens in Ukraine right now is devastating. Every day more and more people die, more and more cities are ruined. Over the weekend, the Kyiv region was liberated after a month of occupation. Pictures of Bucha (a beautiful small town near Kyiv) can make any normal person sick: mass executions, civilians being killed on the streets, lying there for days and weeks, half-burned bodies of raped and naked women, robbed houses. Those pictures are telling the terrible truth about Russia, russians, and their war in Ukraine. There is no excuse for terrorism and what we live through and observed by the whole civilized World – is terrorism and genocide.
Since this meeting and discussion is about business and economics, there should be numbers. So I will try to get into them, but no numbers can validate what Ukrainians saw in their cities after russian invaders left them.
According to various estimates, our economy is ruined by between 500 billion and trillions of dollars. In 5 weeks. And it will take years and years to rebuild Ukraine.
I think this is the first time in history when war is so connected to economics.
Unfortunately, Russia’s domestic political stability at the moment looks high. Protest sentiments in Russia are low, there has been no significant split between elites, and the loyalty of the security forces to Putin is not yet in question.
There is little dissatisfaction with the consequences of the war among a small number of elites, mostly «technocrats» and «old officials». Young people under the age of 30 and the urban middle class are the most affected by the current situation and sanctions out of the population capable of protest.
There are two types of sanctions – official sanctions of countries and private companies.
The G7 and the EU have decided to disconnect several Russian banks from the SWIFT system. The disconnection of banks from SWIFT does not limit their ability to make payments in foreign currency, but slows down payments and makes them more expensive.
It is important to note that the problems of banking transactions are rather temporary. At the moment, this leads to supply disruptions and rising costs, but over time, both importers and banks are adapting. Alternative and fast methods of payment through third countries or analogs of the SWIFT system will be created (for example, Russian SPFP and Chinese CIPS).
And if we are talking about the economics, let me give you 10 consequences of sanctions in the near future (1-6 months, key – 2nd quarter of 2022) for Russia in order to understand if and how they help Ukraine, mostly leading to changes within russia itself. As a basis, I took a report from the Ukrainian Institute of the Future that analyses the impact of the sanctions.
1.Devaluation. During the month of the war, the Russian ruble fell by 19% against the US dollar. In March, the European Union and the United States imposed a ban on the import of banknotes into Russia. Though the official exchange rate almost did not change on the «black» market, one dollar is estimated at 250-300 rubles.
It is believed that the devaluation of the ruble by 10% leads to inflation by 1%. Accordingly, the fall of the ruble will lead to a «weight of wallet», a reduction in real household income, and a reduction in effective demand.
2.Reduction in the supply of imported products, a sharp narrowing of supply, shortages of certain goods.
According to FourKites, since the beginning of the war, imports to Russia have fallen by 59%, including imports of household goods and industrial goods.
3. Inflation. A reduction in supply is always an increase in prices.
First, the rise in prices will affect the «middle-class urban family», which has a high share of imported products in the consumer basket. Due to sanctions and inflation, the consumer line is expected to change in the long run, namely simplification, fewer high-tech products, and an increase in the share of Chinese and Indian goods (medicines, gadgets, cars, etc.).
In villages with conventionally grown potatoes, locally produced pasta, oil, and sugar, it may be a little easier at first. However, with a certain time lag, prices will rise for everything, including domestic products. And for low-income people, whose consumer basket consists mainly of food and medicine, the consequences will be the most traumatic.
Inflation is hitting the poorest. But the poor are not a protest power. The likelihood that they will join the protest audience remains low. It is most likely that 70-80% of the population will suffer, trying to «squeeze» something out of the state and thus become even more dependent on the state.
4. Fall of the industry: decline in production, fall in employment, unemployment. The largest hit by the sanctions is the aviation sector, the automotive industry, mechanical engineering, the electronics sector, the oil, and gas sector (its modernization), and metallurgy. The more technological the production, the higher the share of imported components, and, accordingly, the more it will suffer from sanctions.
If the shutdowns take place, it will have a multiplier effect on the economy. And this can be disruptive. e.g., The Russian car industry employs about 300 thousand people, and another 700-900 thousand are employed in Russian companies that are suppliers to the car industry.
5.Falling incomes and employment in services. The first thing that consumers save on when real incomes are reduced are services: beauty salons, fitness centers, catering, restaurants, recreation, and more. The tourism sector is likely to fall. A decline is expected in trade. This is an important part of the Russian economy: the share of wholesale and retail trade is almost 12% of GDP and 15% of all employees.
6. A blow to the construction and real estate market. About 40% of Russian companies have already frozen their construction projects across the country. This is due to the imposition of sanctions against Russia, which leads to disruptions in the supply of construction materials, their shortage, and a rise in price. According to experts, since the beginning of the war, the cost of building materials has increased in some segments by 80-100%. Some companies decide to freeze some projects indefinitely and redirect resources to complete near-completed projects.
7. In Russia, it is planned to transfer to the state assets owned by foreign companies that have left the market. The Public Consumer Initiative has created a list of 59 companies that can be nationalized, including McDonald’s, Volkswagen, Apple, IKEA, Microsoft, IBM, Shell, Porsche, Toyota, H&M, and others.
8.Exit from partnerships of oil and gas foreign partners. I am not going to name all, just a couple:
BP sells a stake in Rosneft (19.75%).
Shell is leaving the joint venture with Gazprom and is terminating its participation in the Nord Stream-2 project.
Exxon Mobil stops oil and gas production in Russia (on the island of Sakhalin) and stops new investments. The company leaves the Sakhalin-1 consortium and recalls American specialists from Russia.
What is critical here is that companies are leaving with their own technologies, including offshore drilling technologies for gas production, which Russia needs to develop new fields.
9.Sharp increase in interest rates on loans and lack of working capital in the business.
10.Reduction of microcredit (lending for those who cannot reach the next salary). People who live from salary to salary cannot get a loan today. This is again a factor in the growth of poverty, the barbarism of the population, and the growth of crime.
Russia’s economy is going down. Experts talk about the beginning of the economic winter in Russia, use the term “Iranisation” of the Russian economy, and draw parallels between Russia and North Korea.
Current sanctions have critical consequences in terms of living standards and quality of life in Russia over the next 10 years. Lack of prospects, opportunities to realize their life potential, the need to survive instead of making plans for the future and development – all this calls into question the feasibility of life in Russia on the horizon of 5-10-20 years and makes the issue of emigration more relevant than ever. Summing up in one sentence, we can say that «Vladimir Putin stole the future from the Russians.»
At the same time, the basis of internal stability in Russia is Putin’s personal image and absolute trust in him PERSONALLY by the population, not the government, parliament, or government as a whole. It holds an elite consensus, as well as a social contract in Russia, which he himself guarantees and embodies.
I would like to finish again with images of BUCHA – a beautiful town near Kyiv that made me sick on Saturday evening and the entire day yesterday. People’s lives cannot wait for another 10 years so that the current status of sanctions works slowly and mildly on society which Putin created in russia and people accepted by voting for him for 22 years and western society inviting him every time to the table. There is a huge moral dilemma in what we currently experience, there is a huge challenge to democratic order with respect to Human dignity, freedom of speech, and free society which Europe was building for many years.
There are many concerns: what if the situation engages more countries, what if we give more military weapons to Ukraine, what if… many more what if? But I would like you to ask yourself – What if Ukraine loses? Everybody in the free world will lose, as when they come here they will do the same as they did in BUCHA.
The first step of the EU Action Plan of Sustainable Finance
New regulations in the ESG sphere are on the upswing especially in the EU. To reach the commitments of the Paris agreement, the European commission has introduced new regulations as the first step of the EU action plan: the Sustainable Finance Disclosure Regulation (SFDR). The first level was already implemented on March 10th 2021. The implementation of the regulation is an extension of the EU Taxonomy, amending the issue of greenwashing among financial market participants (FMPs). The new reporting requirements are profound and will be fundamental to almost any participant on the European markets, whether you are in the financial, or for that matter, the manufacturing, retail, service, non-governmental and governmental sectors.
The European Union’s experiment in defining what is sustainable and in directing markets to more sustainable investments, is putting pressure on market players to keep up with the quickly paced regulative developments.
Two main issues are subject to the debate of appropriate implementation of the SFDR, which entail firstly, the uncertainty of product classification and secondly, the complexity of data collection and usage. Not only all those affected must revise their whole reporting regime, but the EU must ultimately also ask itself the question whether the regulations have nurtured the intended behavior of the market.
SFDR and PAI in general
The SFDR is implemented to benefit clarity for investors and asset managers, by improving their ability to compare investment options from a sustainability point of view. Therefore, the SFDR provides a collective framework, which requires FMPs to disclose the way they are taking sustainability risks into consideration in its business practices (entity level) and in its financial products (product level) in a consistent and curated fashion.
Additionally, the FMP must report on the principal adverse impacts (PAIs). These contain a list of mandatory and voluntary adverse impact indicators, covering environmental issues and the field of social and employee matters, respect for human rights, anti-corruption, and anti-bribery matters. Based on the SFDR disclosures, the product offerings can then be classified within the three categories referred to as article 6, 8, or 9 products, which indicate the level of greenness ranging from article 6 which does not consider sustainability at all, and article 9 which must follow a sustainable objective.
Issues arising
The objective of the EU Action Plan and the SFDR is to reorient financial capital towards sustainable products and solutions. However, certain challenges raise the question whether the regulation can indeed serve this very purpose. To begin with, the mechanics of defining light and dark green products is lacking a foundation and boundaries, allowing for self-interpretation. The differentiation between light and dark green is ambiguous, and thus instead of serving as a guideline, is increasing uncertainty about what the articles constitute.
Issue 1: The color palette of light and dark green assets
One might say, just as colors are perceived differently by each human, light and dark green assets can be various shades of green and thus, on completely different sustainability levels. The regulatory product declaration is not yet methodologically sound, the lack of distinction of the two leaves room for interpretation of the classifying entity. So far, no specific classification mechanism or framework exists that FMPs can apply and are thus able to approach the classification in more prudent or more generous ways. One may put a product under article 8, while at the same time another FMP might classify the same product under article 9.
It seems the darkness of green is up for preference of the asset manager. Although there may be consensus that exclusion strategies are minimum requirements for both classifications, the scope of exclusion criteria varies greatly. This allows for instance some article 9 products to still be involved in controversial actions, such as fossil fuels, tobacco, and controversial weapons.
Secondly, collecting relevant data poses a challenge, and even if data is available, its variety used to report on the SFDR and the PAI, makes the curation inconsistent and biased. An investor might have a full PAI statement to assess its investment, but can one trust the accuracy and relevancy of the data?
Issue 2: Quality of data fades into the background
The PAI statements can be considered as a curation tool for asset managers (AM) to filter for the most sustainable products and steer capital towards green transition products. Even though the framework of the PAI indicators might be well structured, what is important is the quality of inputs. But the complexity of PAI indicators poses challenges for almost any market participant. PAI data is often not readily available, and this is aggravated by the fact that this data needs to be tracked on a continuous basis. Data collection and maintenance can thus become costly for the underlying portfolio companies. Large cap companies can overcome this issue, but small cap players are confronted with an expensive data collection for a wide range of PAIs or with the need to opt out due to lack of data availability.
Hence, large cap companies may gain competitive advantage without indicating greater performance. AMs incorporate the PAI data in a screening process to extract the most responsible products of the investment universe. However, some asset managers are simply selecting those assets with the highest coverage of PAI indicators. Again, leaving large cap companies in favor, although the high coverage of indicators not necessarily correlates with sustainable performance. The quality of the data fades into the background and investments with higher sustainable and financial potential can be missed out on. Ultimately, businesses leading the market today, may stay right where they are, without enabling opportunities for more innovative and greener solutions.
While the intention of the SFDR is to further restrict greenwashing, current practice may raise the question whether there are still loopholes for FMPs to label their products as greener as they actually are. Although we have seen regulations to be great drivers of sustainable corporate and market action, guidelines must be established to provide more specific and narrow pathways. The weak structure of product classification and the complexity of data may prevent the SFDR to provide a framework for more coherent and uniform information of sustainability risks. The European commission must clarify actual implementation practices, to enable the entire effect of capital reorientation. No market participant is exempted from the need to be aligned with the SFDR today, as new waves of regulations will follow, and it is to start paddling.
About the Author
Milena Karen Bär is a student researcher in ESG and Sustainable Investments, absolving a Master’s degree in applied Economics and Finance at Copenhagen Business School. Her research projects are mainly within the field of ESG metrics and regulation, with a focus on the investor’s side.
Kristjan Jespersen is an Associate Professor at the Copenhagen Business School. He studies on 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.
From the outset, this blog post takes the perspective that behavioral finance is required to assess the perceived tension in sustainable investing (SI). Our work investigates the extent to which sustainability considerations are included in investment decisions, and the drivers behind SI approaches.
Sustainability is increasingly integrated in financial markets, with the acronym “ESG” (Environment, Social, Governance) becoming an all-encompassing term widely used in all phases of the investment process. According to a recent global review, sustainable assets [1] reached USD 35.3 trillion at the end of 2019, representing 35% of total professionally managed assets, and they are set to grow further in the coming years. Yet, despite its growth and the positive sentiment associated with it, there is an inherent tension in sustainable investing.
This tension stems from the apparent disconnect between the theoretical assumptions of classical financial models, focused on risk and financial returns as the predominant determinants of investment decisions (e.g., Capital Asset Pricing Model, Modern Portfolio Theory, etc.), and the empirical evidence of SI, where portfolio allocations are affected by non-financial aspects like personal values and social pressures. How can we make sense of this tension?
Usually, the contradiction is formulated in terms of a tradeoff between financial returns and ESG impact: in order to achieve one, investors must forego the other. However, this view is still rooted in a traditional finance perspective, according to which including ESG considerations or seeking a non-monetary impact comes at the expenses of returns.
There needs to be more nuance in how sustainable investing decisions are investigated and assessed. Given the pervasive and engaging nature of ESG issues, sustainable investing is likely shaped by internal and external forces that go beyond the financial-vs-impact debate. By acknowledging the role that cognitive limitations, biases, and the external context play for investments, behavioral finance allows to capture the financial impact of factors that tend to be overlooked in mainstream financial theories.
Under this perspective, the authors carried out a study based on primary data from European retail and professional investors. It focused on two main questions:
To what extent are sustainability considerations included in investment decisions?
Firstly our analysis broke down the relative importance of four attributes for the investment choice, i.e. the relative weight (expressed in percentage) that each characteristic exert on the investment decision. Sustainability attributes carry a relative importance of about 38%, with ESG score displaying a 26% relevance, and the investment’s end objective a 12% relevance. Taken together, these parameters display a larger role than standard financial attributes of risk level (relative importance of 33%) and expected returns (relative importance of 29%) (Figure 1). The results confirm the significance of ESG aspects for a well-rounded assessment of an investment, arguing against the traditional perspective of risk and returns as the sole determinants of investment choices.
Figure 1 – Relative importance of investment attributes for investment choice, by investor type
What drives investors to invest sustainably?
Secondly, we identified the main tendencies leading investors to engage in SI. Starting from a set of 16 heterogeneous motives, 4 main drivers emerged: a desire for self-expression, a financial-strategic rationale, the influence of the external context, and an opportunistic motive (Table 1). These drivers depict SI as a multifaceted phenomenon that unfolds along various dimensions, and not only on the financial and impact layers. They propose a novel perspective to think about SI, which takes into consideration how endogenous (e.g., alignment with values) and exogenous (e.g., role of regulation) forces may affect investments.
Table 1 – Drivers of Sustainable Investing
How can the findings help us better assess sustainable investing?
This analysis shows the extent to which ESG aspects are integrated in investments, confirming their importance for investment choices. It also shows the multidimensionality of SI drivers, which eschews the rigid perspective of traditional finance and accounts for the impact of relevant internal and external factors.
With this understanding, it is possible to formulate practical insights for industry participants to address the current challenges of SI. In fact, there are concerns related to the over-inclusion of sustainability in investment decisions at the expenses of fundamental financial analysis, which may lead to mispricing, inflated asset evaluation, and potentially an “ESG bubble”.
Standardize definitions and improve sustainability communication. Social context emerged as one of the drivers of SI, and regulators have a strong role to play in harmonizing the meaning of sustainability in finance. Legislative and non-governmental bodies are working to overcome the lack of standard definition and frameworks in SI – e.g., via the European Union’s Sustainable Finance strategy. Their effort to create a common vocabulary and shared understanding of what SI entails will help to align incentives, concepts, and strategies. In parallel, the financial-asset supply side(e.g., fund providers, financial advisors, etc.) should communicate clearly and extensively on the sustainability aspects of financial products. Given the importance of ESG characteristics for investment choices, this will ensure investors have reliable and trustworthy information to guide their investments. Together, the agreement in terminology and the availability of sustainability information will reduce the possibility for misinformation and opportunistic tendencies to sway investment decisions.
Recognize the existence of complex drivers behind sustainable investment decisions. Investors, both professional and retail, shouldevaluate how different motives affect their investment choices. Knowing that multiple drivers exist will ensure that investment are aligned with goals, limiting the influence of irrationality and misinformation. This will not only benefit investment strategies, but also curb counter-productive results such as the emergence of an ESG price bubble. To explore what drives investor’s decisions, an ad-hoc survey could be submitted ahead of opening investment accounts, mirroring the logic of the MiFID directive. This may have positive effects, such as involving more retail investors in sustainable investing [2].
Finally, consider adopting a behavioral approach when studying sustainable investing. The flexibility of behavioral finance may allow to grasp further insights and help to think about this timely topic in a novel way.
References
[1] The Global Sustainable Investing Alliance (GSIA) considers defines “Sustainable” all assets that integrate ESG factors in the analysis and selection of securities. More detail in their latest global report.
Margherita Massazza is a CBS and Bocconi graduate in Economics of Innovation, with a focus on Sustainability. Her research investigates the links between traditional investments and behavioral finance to understand how sustainability decisions unfold. She is currently working in the Foresight team of AXA, an insurance company, where she studies the role that corporations will play in the future and how the concept of sustainability will evolve.
Kristjan Jespersen is an Associate Professor at the Copenhagen Business School. He studies on 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.
By Dr. Kristjan Jespersen, Dr. Izabela Delabre, Dr. Caleb Gallemore, and Dr. Katryn Pasaribu
◦ 3 min read◦
Tropical deforestation continues at alarming rates, with 12 million hectares of tropical tree cover loss recorded in 2018. Much of this deforestation is linked to large-scale agricultural development. Palm oil companies are seen as key deforestation culprits due to high-profile media campaigns being led by NGOs and, in response, recent years have seen the proliferation of private sector pledges and initiatives to address deforestation in the palm oil value chain. There has also been growing international focus on forest conservation in the context of climate mitigation, with countries at 2021’s United Nations Climate Change Conference (COP26) pledging to halt deforestation by 2030. Multi-billion dollar initiatives, such as the Bezos Earth Fund are investing in nature-based solutions to address climate change, including through the protection and reforestation of forests and other ecosystems.
Given these ambitions, an important question for corporate sustainability and conservation research and practice is how to link financing mechanisms for conservation and value chains, two policy streams that are generally disconnected. Actual methodologies for understanding appropriate, long-term financing for forest conservation remain elusive, and this knowledge gap hinders the clear assignment of responsibility, accountability and sustainability of conservation efforts.
Introducing No Trees, No Future – new research project
An ambitious new research project “No Trees, No Future – Unlocking the full potential of conservation finance”, funded by the David and Lucile Packard Foundation, seeks to design and test a rigorous methodology for understanding the responsibility for conservation finance of influential firms in the palm oil value chain. It addresses important knowledge gaps that currently impede effective conservation finance, examining questions such as: Which firms are responsible for financing conservation? What are the motivations of firms to engage in different types of conservation finance initiatives? To what extent are companies willing to internalize conservation costs? What might cost-sharing models look like?
This novel, interdisciplinary research project uses a mixed-methods design that combines in-depth case studies, surveys and remote sensing to explore how the costs of conservation may be shared effectively and equitably between palm oil value chain actors, and provides a resource for external stakeholders seeking to identify firms’ contributions to land cover change, in Indonesia to start with.
The research will involve the development of data-intensive methods to assess the spatial footprint of the supply chains of a set of lead firms in the oil palm value chain, as well as in-depth interviewing of stakeholders across the palm oil value chain to identify the feasibility and possible impacts of adopting new methods for conservation finance.
Our goals are: (1) to develop a methodology that can be readily applied to estimate lead firms’ responsibility for contributing to conservation finance in the palm oil sector, and (2) that business models and strategies integrate conservation finance effectively, supporting more equitable cost sharing.
The research will identify several possible models for assessing spatial footprints of firms’ supply chains in the oil palm sector, testing their feasibility with a selected group of investors and conservation project proponents. Following this initial project, which focuses on the palm oil value chain, we intend to explore possibilities in other commodity sectors, and how to scale up efforts to support effective and equitable conservation finance.
To what extent will companies be willing to absorb the costs of conservation finance into their supply chain transactions? How might potential barriers be overcome? It is our intention that the project contributes to companies taking on greater responsibility for conservation finance, embedding long-term conservation costs into the palm oil value chain (that are currently externalized), disrupting ‘business as usual’ to support forest conservation, given their critical role in climate mitigation and biodiversity conservation.
We will share our interim findings on this blog as the project progresses. We would be delighted to hear from researchers from different disciplines and practitioners working in this field. If you have any questions or comments, please get in touch!
About the Authors
The two-year project is led by Dr. Kristjan Jespersen, Associate Professor at the Copenhagen Business School (CBS). The research team includes Dr. Izabela Delabre, Lecturer in Environmental Geography at Birkbeck, University of London; Dr. Caleb Gallemore, Assistant Professor in the International Affairs Program at LaFayette College, Pennsylvania; and Dr. Katryn Pasaribu, seconded from Universitas Prasetiya Mulya to CBS.
The corporate political activities of a business – let’s call them “lobbying” as a shorthand, although they comprise much more from public relations to political spending to sponsorship of thinktanks etc – have long played a rather minor role in discussions on corporate responsibilities.
And this relative insignificance also converted into rather minimalist expectations about what responsible lobbying should look like: stay within the bounds of the law (i.e. in some jurisdictions, file some lobbying reports and do not hand out bribes); don’t lie egregiously, although puffery and other tricks of the trade are acceptable; and as some scholars in business ethics would cautiously add: don’t do anything that excludes others from contributing to the democratic discourse in an informed manner.
In many ways this anodyne conception of responsible lobbying mirrors the equally thin conception of corporate responsibilities under the old shareholder-first-and-only paradigm that started and stopped with making profit bounded by legal compliance as the primary responsibility for business.
A growing mismatch
Such a close alignment is hardly surprising. Yet while the broader expectations for corporate responsibility have substantively evolved and expanded since then, no such trajectory can be discerned for corporate political responsibilities. The former moved from negative responsibilities of don’t be evil to a growing set of capacious positive obligations of how companies ought to treat their various stakeholders and the environment. The latter – expectations for what constitutes responsible lobbying – appeared to largely remain stuck with this minimalist canon of obligations outlined above. True there have been some improvement at the margins, more reporting on political spending and lobbying and more ad-hoc pressure for taking sides on a small segment of social issues in some jurisdictions.
But despite the best efforts of a small, dedicated band of good governance advocates the scope and urgency of public expectations on what responsible lobbying should look like have not budged much and certainly have not grown in line with broader corporate responsibilities.
Enter the climate emergency
But things have changed dramatically over the last few years. Responsible lobbying is receiving much more attention in the policy debate and in academia and it is increasingly associated with a set of positive corporate obligations and much more stringent boundaries for which tactics are considered illegitimate. As I would argue, there is one principal engine that drives these much higher expectations for what responsible lobbying should entail: the climate crisis, the civilisational challenge to decarbonise the world economy and several dynamics that it has unleashed in the policy arena.
There is a growing recognition, for example, that what companies do in climate politics is at least as important and often more important than what they do operationally to reduce their own carbon footprint. Then there is the emergence of a rapidly expanding climate governance and corporate accountability ecosystem whose tracking capabilities, incentive levers and accountability mechanisms dwarf anything that is available for governing lobbying in politics more conventionally. Unfortunately, there is not enough space here to elaborate on these and other such drivers.
From projecting future aspirations to back-casting for present obligations
For the remainder of this blog I would like to suggest and focus on another, perhaps less obvious and more difficult to grasp contributing dynamic: a shifting normative corridor of what is considered responsible lobbying driven by the particular nature of the climate challenge. The argument goes like this:
Ever more precise climate science and the Paris Agreement to do what is necessary to reduce global heating to a 1.5 to 2 degrees rise to at least avert the most catastrophic scenarios provide a clearly defined, time-bound landing zone for policy action. The days of outright climate change denial are thus over. Seeding doubt about the facts of climate change or the decarbonisation goal has thus terminally shifted out of the Overton window of what constitutes acceptable viewpoints and (barely) tolerable public relations messaging. But more interestingly, things have not stopped here. The civilisational urgency of getting to net zero by 2050 leaves only a few years and a very narrow and rapidly narrowing corridor of necessary action options.
To oversimplify just a bit: responding to the climate crisis is by now more of an exercise of back-casting, deriving the necessary public and corporate policy action from what must be achieved, rather than an open-ended experimentation space guided by a rough compass for direction of travel.
We are by now so short of time and so clear-sighted about the science that we basically know what fossil assets must stay in the ground, what infrastructures need to be blitz-scaled etc. This clarity of goal and techno-economic pathway also means that most not-so-good-faith lobbying tactics aimed to stall, distract, or opportunistically suggest some costly detours are much easier to spot and call out – than would be the case if the option space was still more open. The normal-times policy deliberation on what business could be imagined doing to help us move towards a desirable future has morphed into a policy imperative for what business must and must not do by when to help achieve net zero by 2050.[1]
Attesting to these dynamics, for example are the emergence of reporting frameworks, assessment exercises, shareholder action and CEO commitments that judge or design a company’s lobbying efforts against scientifically derived necessary policy actions for decarbonizing by 2050. But perhaps even more emblematic for the rising expectations for responsible lobbying is the action plan that one of the leading global PR agencies working for fossil fuel interests has been forced to put forward very recently amidst intense public pressure, including from its own employees. Here some excerpts:
Put science and facts first. We seek a better-informed public on climate issues so that we enable swift and equitable action. We will ONLY be led by the science and base our work on objective, factual and substantiated data.
We will establish and publicize science and values-based criteria for engagement with clients. This goes farther than our principle of not accepting work from those who aim to deny climate change. We will not take on any work that maintains the status quo, or is focused on delaying progress towards a net-zero carbon future. We will support companies that are committed to the Paris Agreement and transparent in reporting their progress in accelerating their transition to net-zero emissions.
Hold ourselves accountable. We hold ourselves and our clients accountable to continual progress, with transparency on results through regular reporting.
A PR maestro engaging in PR spin for managing its own PR crisis? Perhaps. But there are enough concrete actions included that makes it worthwhile to track this and hold the company up to its commitments.
And such a forced response by a world-leading PR company clearly demonstrates that expectations for responsible lobbying against the backdrop of the climate crisis, have rapidly matured from compliance and do no outright evil to a concrete set of positive obligations against which political footprint of companies and their service providers can be evaluated.
The ingenuity required to get us to net-zero is 20% technical and 80% political of how to incentivize, mobilize for and administer a just, legitimate transition.
This outmost importance of climate politics and policy-making combined with the outsize role that businesses and their associations play in this space as the best-resourced and most influential interest group, clearly highlight that responsible lobbying as a set of substantive, positive obligations is an essential piece of the puzzle in solving this civilisational challenge. And my bet is that things will not stop here: higher expectations for responsible lobbying on climate issues are likely to lift all boats over time and translate into higher expectations for how business ought to behave in the political sphere more broadly.
[1] There remain of course a number of important unresolved policy choices with regard to carbon capture, geo-engineering, bridging fuels etc. but the overall option space and available policy pathways are by now much narrower than two decades ago or relative to many other big policy challenges.
About the Author
Dieter Zinnbauer is a Marie-Skłodowska-Curie Fellow at CBS’ Department of Management, Society and Communication. His CBS research focuses on business as political actor in the context of big data, populism and “corporate purpose fatigue”.
Foreign investors in Myanmar have come under increasingly intense pressure to cut ties with the Myanmar military since the military coup on 1st February 2021. Immediately after the coup, Japan’s Kirin Beer announced its decision to cut ties with its joint venture partner MEHL, i.e. the commercial arm of the military. However, fellow investors did not immediately follow Kirin’s withdrawal. Instead, they appeared to be treading water to rid out the storm.
Myanmar had been undergoing democratic transition since 2011, promising developments and luring investors’ interests as the last frontier of the Southeast Asian market. Indeed, the democratic transition had pathed the way for economic and developmental achievements, attracted investments in several sectors such as garment manufacturing. Yet then the military took back power, among others to secure its economic interests.
Governments and civil society in their home countries have been calling on companies to act responsible and not to do business with the military.
The pressure on companies who had been sourcing from Myanmar, including popular fashion brands like H&M and Bestseller, has been mounting. H&M and Bestseller did respond to the call and did suspend their orders from Myanmar before deciding to resume orders in May. Several foreign investors have withdrawn as the military’s attack on the civilians intensified and the international community stepped up their sanctions regime. The latest step was the refusal of the ASEAN not to invite the military leader Senior General Min Aung Hlaing to the summit in October 2021.
But is leaving the country really “the right thing to do”?
Companies who stay support the military in one way or another, for example by paying taxes directly to the military or paying rent or other fees to one of the military conglomerates (MEHL). Such payments from corporate investors provide a financial lifeline to the continuation of the military rule, hence, funding is a very important aspect of this dilemma for foreign investors and policy makers alike. The governments of the U.S., UK, Canada, the European Union have imposed sanctions targeting military interests. However, those sanctions so far have fallen short of targeting it where it would really hurt the military, in particular in the oil and gas sector that provides a lot of revenue. To weaken the military’s financial lifeline, the shadow government and activists have been calling for companies to stop all kinds of payments to the military. Inside the country, boycotts of military intestates have intensified. For instance, householders have been participating in an electricity bill boycott, thus using the withdrawal of this kind of support as a form of resistance. Not surprisingly, many companies have by now decided to pull out.
Yet while leaving the country ceases support to the military, it also entails that companies no longer provide goods and services (including essential services) and support to the workers and civil society (e.g. Telenor; Germany’s food retailer Metro. Companies have been supporting workers by sustaining safe workplaces, thereby securing workers’ incomes and stability. What is more, their support has enabled and sustained social movements. For example, women union leaders in the garment industry have been a driving force in anti-military protests.
Given the severity of human rights violations by the military, companies ought not to continue business as usual. Only by leaving can they cut all ties with the military and avert their complicity in atrocious human rights abuses. But by leaving, they also cease support to their most vulnerable stakeholders. The impact on the social contributions (via CSR) and Myanmar civil society, especially their workers, might be devastating.
About the Authors
Verena Girschik is Assistant Professor of CSR, Communication, and Organization at Copenhagen Business School (Denmark). She adopts a communicative institutionalist perspective to understand how companies negotiate their roles and responsibilities, how they perform them, and with what consequences. Empirically, she is interested in activism in and around multinational companies and in business–humanitarian collaboration. Her research has been published in the Journal of Management Studies, Human Relations, Business & Society, and Critical Perspectives on International Business. She’s on Twitter: @verenacph
Htwe Htwe Thein is an Associate Professor in International Business at Curtin University, Australia. She is internationally known for her work on business and foreign investment in Myanmar and has published in leading journals including Journal of World Business, Journal of Industrial Relations, Journal of Contemporary Asia, International Journal of Cross-Cultural Management and Feminist Economics (and international publishers such as Cambridge University Press, Routledge and Sage). She is also well-known as a commentator in media and press on the Myanmar economy and developments since the military takeover on 1 February 2021.
The EU Taxonomy reflects a classification system that assesses whether certain economic activities are environmentally sustainable. Without doubt, the idea is a good one and the Taxonomy acts as a prerequisite for the EU’s Corporate Sustainability Reporting Directive (CSRD) and the Sustainable Finance Disclosure Regulation (SFDR) to unfold their full potential. But: should fossil gas and nuclear power be included into the Taxonomy and hence count as environmentally sustainable? A leaked EU “non-paper” seems to suggest exactly that…
Including fossil gas and nuclear power will significantly harm the Taxonomy, both in terms of its perceived legitimacy but also in terms of its consistency with existing policy frameworks and regulations. I believe that there are three key points to consider:
Legal Inconsistency: Including fossil gas and nuclear power into the Taxonomy is likely to undercut the very regulation that the Taxonomy is based on. Article 10 of the Taxonomy Regulation (EU 2020/852) makes clear that an economic activity is considered sustainable if “that activity contributes substantially to the stabilisation of greenhouse gas concentrations in the atmosphere” (my emphasis); at least for fossil gas this is highly questionable. Although nuclear power is a low-carbon energy source, it is by no standards a safe alternative to renewables. In fact, it is a risky energy source, especially if we consider its entire life cycle. This is exactly why many investors see nuclear power as an exclusion criterion for sustainable finance products. When considering the entire life cycle of nuclear power, this energy source creates non-calculable risks vis-à-vis the Taxonomy’s environmental objectives (e.g., the protection of healthy ecosystems). For instance, the mining and processing of uranium has a questionable sustainability track record.
Policy Inconsistency: The EU itself suggested that to reach its goal to reduce emissions by 55% until 2030, there is need to cut 30% of the total consumption of fossil gas by 2030. However, including fossil gas into the Taxonomy will re-orient capital flows in a way that money is flowing into this sector (and not away from it). At the end, it is likely that this will lead to higher usage of fossil gas, much beyond the “transitional use” that the EU intends to establish. Further, a number of EU member states have pledged during COP26 to show “public support towards the clean energy transition and out of unabated fossil fuels.” This pledge does not seem well aligned with an inclusion of fossil gas into the Taxonomy.
Reduced Perceived Legitimacy: A factor that is less debated in the public, but still very relevant, is the reduced legitimacy of the Taxonomy. Although the Taxonomy, and linked regulations like SFDR, imply more work and a certain “bureaucratic burden” for financial market participants, many market actors have welcomed the new regulations. They increase transparency, make greenwashing harder, and hence have the power to re-orient capital flows into sustainable economic activities. Including fossil gas and nuclear power into the Taxonomy, endangers this legitimacy. In fact, the Taxonomy may move “from hall of fame to wall of shame”, as the WWF recently suggested.
At the heart of the problem, lies a misunderstanding, I think. The EU Taxonomy is supposed to single out those economic activities that have the potential to make a substantial contribution to reaching six environmental objectives. Just because an economic activity is a little less unsustainable than comparable activities, it is not ipso facto sustainable. Being less unsustainable is different from being sustainable. Put differently, just because nuclear may be “cleaner” than coal does not imply that the former contributes to sustainability.
It is often argued that fossil gas and nuclear power need to be included into the Taxonomy as they are necessary “transitional activities”. I believe this claim is misleading:
Focusing on “transitional activities” sets the bar very low for Europe’s ambitions Green Deal. Ursula von der Leyen called the Green Deal Europe’s “Man on the Moon” moment, pointing to its ambitious character. If contested energy sources like fossil gas and nuclear power become part of the Taxonomy, we have not put a man on the moon. Maybe, then, we have not even managed to let the rocket start…
Excluding fossil gas and nuclear from the Taxonomy does not imply that these energy sources will vanish overnight. It simply means that they will not be considered a sustainable economic activity (like a number of other economic activities).
It is time to take the Taxonomy seriously, otherwise we may slow down or even hinder the necessary green transition of Europe’s economy…
Last March European parliament gave a proposal to create mandatory Human Rights Due Diligence directive. The aim is to prevent human rights and environmental harm in a more efficient way, through regulation. The commission proposal is based on the UN Guiding Principles on Business and Human Rights and has three core elements: firstly, companies should themselves assess the risks of human rights violations in their supply chains, secondly, take action together with the stakeholders to address identified threats, and lastly – and most importantly – offer a system for access to remedy for those whose rights have been violated. The commission is expected to give their resolution on the matter before Christmas, though the decision has been delayed already few times.
The EU proposal can be seen as a part of a continuum towards more mandated forms of corporate social responsibility (CSR). Traditionally CSR has been defined as something voluntary that companies do in addition to the letter of law in response to stakeholder pressures and societal expectations. At the level of individual organisations this has meant providing societal good through philanthropy and partnerships with NGOs or avoiding harm by improving the sustainability of business operations. Also, a great number industry level voluntary standards have been invented to solve the environmental and labour issues in transnational supply chains (Fair trade and Forest Stewardship Council being good examples).
However, the past 20 years of voluntary measures have not been able to eliminate human rights violations in business operations. Indeed, it seems that voluntariness works for inspiring collaboration and innovating for better world.
In situations of wrongdoing, exploitation, and harm, stronger frameworks are needed to hold organizations accountable and offer remedy to victims.
The recent development towards more mandated forms of corporate responsibility, like the French Due Diligence reporting Act or the UK Modern Slavery act, can be seen as efforts to respond to the accountability deficit. In June this year Germany passed a HRDD law stipulating that companies must identify risks of human rights violations in their supply chains and also take countermeasures. Also, Norway passed a similar law that requires companies to conduct human rights and decent work due diligence. Similar issues have been discussed in most of European governments.
There are caveats in creating this type of regulation. It might lead to tick-the-box type of exercises without true consideration for the human rights risk, burden companies if not given enough time and guidance to adjust, and transparency reporting does not seem to be enough to change business behaviour. One of the most difficult, yet most important, area in developing the new binding standards is the pillar three of UNGP: Access to Remedy. This pillar tries to ensure that in cases of violations, the victims will have a channel to make claims and receive remedy. Whether it should be civil or administrative liability or whether there should be an ombudsman in each country receiving complaints or via whistleblowing is all still in the air. What is clear is that whatever the final design of well-functioning HRDD system requires inputs and cooperation from businesses, civil society, and governments alike. Companies know best their supply chains, but sometimes NGOs may be a useful counterpart for identifying the risks and setting up stakeholder consultations. Finally, governments should be final proofers of the system ensuring accountability and enforcement.
While some industry associations have raised concerns about the new regulations and the ability of European companies to oversee operations elsewhere, companies also evaluate that the new EU directive might level the playing field and give them a new tool in managing supply chains. Indeed, it seems that we are moving towards regulated CSR not only within EU but globally. UN has launched an intergovernmental working group to prepare a binding treaty on Business and Human Rights, there is an initiative for minimum global corporate tax and efforts to close tax havens. More and more reporting is expected by companies, not only as increasing ESG reports to shareholders but more and more also as part of the mandatory legal requirements.
Societal expectations are one of the key drivers for CSR. According to the latest polls it seems that European citizens and consumers expect the companies to upkeep good human rights and environmental standards within their global supply chains.
About the Author
Johanna Järvelä, is a postdoc researcher at Copenhagen Business School and member of the advisory committee for Human Rights Due Diligence Law in Finland. Her research focuses on the interplay of public and private governance in natural resource extraction and she’s especially interested in exploring how steer private sector towards providing societal good.
The fashion industry has repeatedly come under fire for its negative effects on the environment. With heightened attention towards the climate crisis and scandals highlighting the industry’s social shortcomings (Rana Plaza, 2013), more and more ‘native’ sustainable fashion brands have emerged. However, parallel, we witness a trend towards ever-increasing consumerism. Frequently, Black Friday is seen as the epitome of consumerism which raises the question: How do sustainable fashion brands approach the biggest shopping day of the year – Black Friday – and how do consumers perceive these campaigns?
We reviewed Black Friday Instagram posts by self-claimed sustainable fashion labels and found they can be conceptualized along two axes: (1) the level to which consumption is encouraged / discouraged, and (2) the degree of action taken by a brand to express its commitment to sustainability. This conceptualization accounts for existing societal marketing strategies, particularly Demarketing, Green Marketing, and Cause-related Marketing. On the one hand, the brand Raeburn closes its shops and urges consumers to use Black Friday to repair their clothing rather than buying new items (Demarketing). On the other hand, the brand People Tree promotes 30% off everything claiming that consumers should “add some green to [their] wardrobe” (Green Marketing).
Business-as-usual, a revolution, or planet-saving purchases – what is actually authentic?
By interviewing 20 consumers, we found that they judge authenticity by inspecting various cues that are leveraged to identify authenticity drivers. For example, donating to WWF (Cause-related Marketing) yielded legitimacy for TwoThirds’ Black Friday campaign. Authenticity is a complex concept – it is multidimensional, subjective, dynamic and socially constructed. Multidimensionality implies that one cannot answer “what is authentic?” precisely; it is an interplay of different attributes. In our case, respondents described an advertisement as authentic when it was credible, relatable, congruent, original and/or impactful. Next, subjectivity means that what is authentic for one person is not necessarily authentic for another. Influential consumer characteristics are a person’s general scepticism towards advertising, level of environmental concern, and understanding of sustainability, resp. do we simply need less- or better/greener consumption to mitigate climate change?
“and it’s kind of a contradiction: ‘Please shop to help the planet’ and I think you can’t shop and help the planet at the same time. So less or no consumption is at all times the best option” (Consumer 1)
“you’re using capitalism to make the world a little bit better. And I think in my eyes, that’s a good strategy to go for” (Consumer 2)
Third, authenticity perceptions can change over time, for example upon new information. Last, authenticity does not exist as a stand-alone concept but is always sensitive to societal changes.
What does this imply for marketers of sustainable brands?
Black Friday is a dynamic context in which brands have to actively reflect on their communication strategy and respective consumer authenticity perceptions. Consequently, no communication strategy shows clear advantages or can be labeled ‘most authentic’. We advise brands to reflect on:
Their standpoint regarding Black Friday
The needs of their target group
The statement they want to make on Black Friday
The tone they want to adopt in their campaign
Sustainable brands increasingly embrace creative ways to distance themselves from the traditional Black Friday, e.g. by closing shops, ‘selling rubbish’ or even raising prices. It remains unclear, however, whether these forms of brand activism reflect a brand’s honest opinion or are employed as a tool to stand out.
We also observe brands who are holding their customers responsible: on Black Friday 2020, Armed Angels let buyers choose between a higher discount or rainforest protection. After Black Friday, the brand revealed that the majority of their customers had chosen the higher discount, which raises the question:
Can consumers be held responsible for making more mindful purchase decisions or is increased action by companies and governments needed?
Upon stating its disappointment about the outcome, followers accused the brand of shaming their customers for choosing higher discounts. This translates to another relevant consideration for sustainable fashion labels – choosing the right tone. While radical messaging conveys urgency and appeals to environmentally concerned consumers, others feel opposed to it and, instead, want to be involved in dialogues. Again, this shows that when it comes to Black Friday, there is no ‘one size fits all’ solution – rather, brands should take time to think about their values and how they can make a meaningful difference on Black Friday 2021.
Throughout the interviews in our study, multiple consumers shared with us how they were inspired by campaigns of sustainable brands and respectively questioned their purchase decisions. This demonstrates that sustainable brands’ communications can actually exceed Black Friday and have lasting effects – not only on their brands’ perceived authenticity but also on our planet’s future.
About the Authors
Nina Böntgen is a recent graduate from MSc Brand and Communications Management program at Copenhagen Business School. Next to her studies, she was actively engaged as team lead and board member of oikos Copenhagen, a student initiative driving change towards greater sustainability. She’s happy to share further insights or engage in discussions on the post or the broader thesis (how sustainable brands navigate authenticity and greenwashing) via email (n.boentgen@web.de) or Linkedin.
Sara Derse is a recent graduate of the Msc Brand and Communications Management program at Copenhagen Business School. Fascinated by the topics of consumer psychology and purpose branding, she was involved in the sustainability-focused student initiative oikos as a Project Manager. She is happy to discuss her thesis (consumer perceptions of fashion brands with a purpose centred around sustainability) in further detail via email (saraderse@live.de) or Linkedin.
Meike Janssen is Associate Professor for Sustainable Consumption and Behavioural Studies, CBS Sustainability, Copenhagen Business School. Her research focuses on consumer behaviour in the field of sustainable consumption, in particular on consumers’ decision-making processes related to sustainable products and the drivers of and barriers to sustainable product choices.
COP26, the 26th UN Climate Change Conference, has just ended. It was supposed to be ‘the next big and significant one’: the great follow-up to COP21 five years ago, the outcome of which was the Paris Climate Agreement, the first binding international treaty on climate change. The global urgency regarding climate issues has certainly never been greater.
Although COP26 has yielded some results and some progress has been made, it has been a disappointment to many, including the iconic and omnipresent Greta Thunberg, who was filmed chanting “you can shove your climate crisis up your a…” along with other demonstrators at a rally in Glasgow – and who summarized the accomplishments of COP26 in three words:
Blah blah blah.
Looking at the Glasgow Climate Pact and its immediate reception, we are certainly, once again, witnessing a political willingness to attribute considerable significance to (non-binding) declarations of intent regarding (possible) future actions and to the mere mentioning of the 1,5°C temperature increase target and efforts to phase-down (not phase-out) the use of coal power and fossil fuel subsidies.
In the absence of truly transformational commitments and progress, the espoused political belief in the power of words to move action can seem quite magical at times, indeed reflective of magical thinking. Certainly, there was nothing magical about the moderate public and civil society expectations of progress preceding COP26. We have to look elsewhere for the magic. We have to lookinside the established political system, where magical thinking is at play in definitions of climate problems and solutions, and where it, in itself, constitutes a problem worth addressing.
However, in the area of climate change and sustainability it is the grownups, in particular politicians, that tend to have a proclivity for magic – with the younger generation seeking to expose the deficiency and unrealness of subsequent courses of action.
In relation to sustainability, magical thinking is a matter of believing that certain outcomes – decoupling of economic growth and GHG emissions, a zero carbon economy – can be achieved by means that, although they may have some bearing on circumstances, are insufficient and ultimately unfit for purpose (according to the best available scientific knowledge).
Ends and Means: Strong and Weak Sustainability
One way to frame this problem, at the most general level, is to distinguish between strong and weak sustainability, as illustrated in the table below.
– source: developed from Sjåfjell (2018)
While strong sustainability calls for radical and systemic change guided by a biocentric preoccupation with planetary boundaries, non-negotiable ecological limits and safe operating spaces, weak sustainability signifies a more pragmatic and incremental approach to change, maintaining an anthropocentric focus on development as (economic) growth, human needs and intergenerational equity. An important point being that urgent calls for action tend to draw on the repertoire of arguments provided by strong sustainability, whereas most solutions ultimately fall under the heading of weak sustainability. They are not radical, only incremental, and certainly pragmatic.
The question is whether it is indeed an act of magical thinking to believe that we can accomplish strong sustainability ends by weak sustainability means. In other words, that we can reach the climate targets we need to reach, according to science, by way of incremental, small steps change – holding onto the growth paradigm, the business case and win-win.
The Magic of Win-Win
Andrew A. King and Kenneth P. Pucker, in a recent piece in Stanford Social Innovation Review, speak of “the costs of magical thinking” in relation to the prevalence of the win-win (or triple-win) mindset and associated terms such as CSV (creating shared value). They talk about “strategies [that] rely on improbable mechanisms, promise implausible outcomes, and boast effectiveness that outstrips available evidence.” Strategies that “inflict harm because they distract the business world and society from making the difficult choices needed to address pressing social and environmental issues”.
This begs the question: What is located on the other side of win-win? How can we escape its magical allure and the often exaggerated claims made in its name? Unfortunately, King & Pucker do not have much to say about this. They speak only of how: “It is time to turn away from alluring unproven strategies and refocus our efforts on those interventions that have proven effective – such as government regulation”.
It is not a terribly convincing argument. Government regulation in the age of man-made climate change is not so much an escape from win-win as it is an embodiment of win-win – and arguably needs to be. Sustainable development is not only about climate change and climate solutions – the social and economic pillar of sustainability need to be considered alongside the environmental pillar at all times. That is, questions of social justice and of what is economically feasible also need to be addressed.
The European Green Deal as a Win-Win Scenario
The European Green Deal is, for better or worse, an illustrative example of this. The President of the European Commission, Ursula von der Leyen, has referred to the green transition as ‘Europe’s Man on the Moon Moment’. Nevertheless, the framing of the European Green Deal reads like a textbook case of win-win, and not a very advanced one at that. As you can read on the Green Deal webpage: “Making Europe climate-neutral and protecting our natural habitat will be good for people, planet and economy. No one will be left behind.” The Green Deal is Europe’s new growth strategy, it will help cut emissions while creating new jobs and, again, it will leave no one behind.
Speaking of private businesses, the arguments for going beyond win-win are quite straightforward. There are ethical issues and matters of responsibility that need to be addressed regardless of whether the company can derive any commercial benefit from it. However, in the political realm of multiple and competing interests and policy concerns it is more difficult to escape the clutches of win-win.
Imagine if von der Leyen would have said: “We need to make sacrifices in order for the green transition to happen. We need to slow down growth, it will cost jobs and we cannot guarantee that some people will not be worse off as a result’. It is a virtually unthinkable scenario. Not least because we know that it is the poorest and most vulnerable population groups that are bound to be worse off.
The Magic of Danish Government Policy
That is to say, government as we know it does not represent a solution to the problem of widespread magical thinking about climate change and sustainability. It is very much part of the problem and there is no apparent escape. Not even for the most advanced nations in Europe. Let us take Denmark as an example. Denmark was just ranked 4th in the 2022 Climate Change Performance Index (CCPI). As the three top spots were left empty to signal that not a single country currently deserves a ‘Very high’ rating, Denmark is supposedly the leading country in the world measured on criteria regarding climate policy, renewable energy, energy use and GHG emissions.
This is not to say, however, that Danish climate policy is bereft of magic. Quite the contrary. Dan Jørgensen, the Danish Minister for Climate, Energy and Utilities, has become famous for waving his own kind of somewhat oversized magic wand: ‘the hockey stick’. The hockey stick was originally used (by American climatologist and geophysicist Michael E. Mann) to illustrate temperature changes over time and the transition from the Holocene era (the long shaft) to the Anthropocene era (the short blade). There is nothing magical about this science-based graph.
However, the image of the hockey stick has in recent years been appropriated by management consultants and policy makers who are using it to serve instrumental and sometimes magical purposes. In the instrumentalized imagery, the bend between shaft and blade represents the (magical) moment of innovative/technological discovery, an inflection point allowing, ideally, for a transition from a period of inferior – ineffective, unsustainable – solutions (the shaft) to a period of superior solutions (the blade).
Dan Jørgensen has been widely criticized for his espoused belief in a long shaft (gestation) period, that tends to become longer and longer and is so far marked by a lack of truly groundbreaking results and postponement of difficult decisions (particulary regarding implementation of a CO2 tax). On the one hand, the inflection point is continually moved further and further away. On the other, it is assumed that the magical moment of discovery and transformative change will happen in time for Denmark to be able to deliver on the Paris Climate Agreement and the even more ambitious Danish climate law.
A concrete example of magic at work in Danish climate policy is the below image from the recent government action plan on green transition. Notice in particular the small miracle that is supposed to happen from 2029-2030, where all the technical reduction potentials on display somehow reach their target of zero. It seems magical. It is certainly not well explained in the action plan how this can come about – or why the reader should find this sort of technical forecast even remotely believable.
The Great Balancing Act: Magic and Reality
There is an upside and a downside to magical thinking and political talk and action that can be said to reflect magical thinking. Today’s magical ideas may turn out to be next year’s (or the next decade’s etc.) realistic solutions or courses of action. Magical thinking blends into notions of aspirational talk and aspirational policymaking, suggesting that lofty goals can help inspire, motivate and accelerate change processes.
However, the downside is if magical belief in win-win solutions becomes a sort of self-imposed constraint or censorship standing in the way of open and honest discussions about the changes and sacrifices needed to make the green transition happen.
This can exacerbate accusations of greenwashing and create more public cynicism regarding climate policy and the willingness and ability of the political system to act proportionately. Magical ambitions needs to connect with harsh realities.
Steen Vallentin is Academic Director of the CBS Sustainability Centre and Associate Professor in the Department of Management, Society and Communication at Copenhagen Business School. His research is centered on CSR as a social and political phenomenon in the broadest sense, increasingly with a focus on corporate sustainability, circular economy and business model transformation – along with the politics and aspirational aspects of sustainable development more broadly.
The recent elections in Germany turned out as the historic loss for conservatives that pollsters have predicted a few weeks before. Responding to the declining poll numbers, the conservative party presented a “team for the future” consisting of several field experts that should help the candidate addressing the big challenges of the country. Their slogan was „Experts instead of experiments“. The message was clear: we know how to solve these issues and voting for another party would be an experiment and therefore risky. While this might appeal to a conservative base, I think this slogan sends a wrong if not hypocritical message.
Framing an experiment as something uncertain and dangerous that should be avoided taints one of sciences most successful methods and obscures the undeniable level of uncertainty associated with policy decisions.
Even after acknowledging the turbulent times during Merkel’s legacy, remarkably little was done to address the challenges of the future. While some inaction might be attributed to a lack of courage or lobbying by special interests, it certainly constitutes the lack of obvious and simple solutions for the many problems the country is facing.
The challenges we face are new and unpredicted in magnitude. While few would disagree with the need for action, there is disagreement about what needs to be done. Experts argue with each other, often struggle to persuade their colleagues, and remain unconvinced by the evidence that substantiates the oppositions claims. Fierce debates about the right course of action often overshadow a sad truth that in many cases no one is and really shouldn’t be sure that the proposed path will be the most successful one. Even more disheartening might be that even after the implementation of a policy, we often have a hard time qualifying if the intervention did more good than harm or quantifying these benefits.
A fundamental problem, particularly economists try to resolve through (quasi-) experimental research methods to understand how a specific policy intervention works. Broadly speaking, they become experts because they do experiments. Pioneers in the study of causal relationships were recently awarded the Nobel Price. Among them David Card who is famous for a study on the effects of a higher minimum wage on employment exploiting a so-called natural experiment.
Experimentation can help us to find out if our ideas and theories work in practice. They should increase our confidence in the people applying them rather than creating a fear of uncertainty.
Our knowledge that COVID vaccines are effective mostly relies on the result of randomized experimental trials. An approach increasingly used to answer questions in the social sciences. For instance, we don’t know how people will respond to universal basic income, which is why a three-year experimental study is currently on its way in Germany.
Pharmaceutical trials are also designed to show that potential drugs have no sever side-effects. While the necessity to ensure the safety of a drug is quite intuitive, the unintended consequences of non-medical products and services are less straight forward. For instance, social media has been suspected to inadvertently contribute to political polarization and erode democratic processes. While many of these claims are based on anecdotes, recent experimental studies from researchers outside Facebook have added hard evidence to the debate and conclude:
Our results leave little doubt that Facebook provides large benefits for its users [but also] make clear that the downsides are real. We find that four weeks without Facebook improves subjective well-being and substantially reduces post-experiment demand, suggesting that forces such as addiction and projection bias may cause people to use Facebook [..] it also makes them less polarized by at least some measures, consistent with the concern that social media have played some role in the recent rise of polarization in the United States.
– Allcott, Hunt, Luca Braghieri, Sarah Eichmeyer, and Matthew Gentzkow. 2020. “The Welfare Effects of Social Media.” American Economic Review, 110 (3): 629-76.
There are obvious differences between vaccines and a social media platform, and probably nobody would suggest that Facebook should have undergone a randomized safety study in the mid-2000s before going public. Such products and services develop over time and can be used in very different ways. However, despite these differences there is an open question about the potential side-effects and the burden of proof. To ensure a healthy society, it might be worth considering that at least with a reasonable initial suspicion of harm, also non-medical companies should be obligated to proof their products’ safety using a suitable experimental design.
There will remain many problems where experiments are unfeasible, and, as seen with the development of Facebook, even the results of the best experiment today might not be a valid description of tomorrow in an increasingly complex and dynamic world. Such a world, however, should also humble us and our experts but foster an acknowledgement that there are many questions for which we don’t know the answer. Hence, we should make use of the best scientific methods available to reduce this uncertainty, which ultimately means that we need more experiments and not less.
About the Author
Jan Michael Bauer is Associate Professor at Copenhagen Business School and part of the Consumer & Behavioural Insights Group at CBS Sustainability. His research interests are in the fields of sustainability, consumer behavior and decision-making.
In 2020, the EU launched its classification system for environmentally sustainable economic activities, the so-called “EU Taxonomy Regulation” (hereafter: the Taxonomy). The Taxonomy is part of an integrated system of new EU-wide sustainability regulations, including new disclosure requirements for investors. While the Taxonomy is based on EU regulation, it can be expected that it will also have effects on businesses beyond Europe.
Basically, there are two ways in which the Taxonomy can affect non-EU companies. First, there are direct regulatory effects on non-EU companies. Because of the global nature of financial markets and the existence of global trade flows, non-EU companies will be directly exposed to the Taxonomy in different ways. Secondly, there will also be more indirect consequences, which I call “ripple effects”. Such effects exist because the Taxonomy raises the bar globally for how sustainability information should be disclosed, by whom it should be disclosed, and it which ways it can be disclosed. I briefly discuss both effects.
Direct Effects
In the short run, some non-EU companies will be exposed to the Taxonomy because of direct regulatory effects. Consider the following two examples:
A non-EU investor or financial advisor that wants to offer products on the European markets will be exposed to the Sustainable Finance Disclosure Regulation (SFDR) which requires an alignment with the EU Taxonomy. To offer financial products on European markets non-EU investors will therefore have to align with SFDR and hence the Taxonomy.
A non-EU company with EU-based investors is very likely to receive questions from these investors about the company’s alignment with the Taxonomy. Investors need this information to meet disclosure requirements under SFDR, for instance to classify their financial products in terms of their sustainability exposure. In other words, at least some non-EU companies will start disclosing more on Taxonomy-related indicators.
I could list more examples here (e.g., non-EU asset managers wanting to raise money in the EU), but the message is clear: the effects of the Taxonomy are not limited to businesses located in Europe. Particularly, the Taxonomy’s interaction effects with SFDR will affected non-European companies as well as investors.
Ripple Effects
Ripple effects are more indirect effects. They occur if an intervention, such as the introduction of a new regulation, creates further effects that reach beyond the system that was supposed to be influenced by the intervention. Such regulatory ripple effects can occur in different ways.
In the context of the Taxonomy, one important ripple effect is related to the practices of European businesses. Many of these businesses are global players, and they will apply the Taxonomy to their global operations regardless of whether these operations occur in a country that is legally covered by the Taxonomy. Sustainability reporting is usually done at the corporate level and therefore also includes firms’ non-European operations. The EU’s new disclosure regulation the Corporate Sustainability Reporting Directive (CSRD) will require that such reporting at the corporate level is taxonomy-aligned. In this way, European global players will “export” the Taxonomy to other parts of the world.
There are also ripple effects at the political level. The system of new EU legislation – including, the Taxonomy, SFDR, CSRD and other regulatory elements – is unique in the world. So far, no other region or country has a comparable system. However, the major economic regions in the world have also realized that future business will be difficult without sustainability-related regulations that enhance transparency and prevent greenwashing.
Consider two recent examples: In June 2021, the UK announced the creation of a Green Technical Advisory Group. This Group is supposed to develop and implement a UK green taxonomy, which is expected to be based in part on the EU Taxonomy system (e.g., in terms of metrics). In the US, President Biden signed Executive Order (EO) 14008 during his first days in The White House. While this EO does not aim at creating a US-based taxonomy, it has created a National Climate Task Force across different federal departments, which at least some see as an important step into the direction of more rigorous ESG-related regulation.
Other countries and regions are likely to look to Europe when thinking about how to design a workable taxonomy regulation, as the challenges that have driven the creation of the EU Taxonomy are the same throughout the world: we need more transparency around sustainable economic activities, we need to better benchmark firms’ sustainable activities, and we we need to prevent greenwashing.
It is too early to say whether there will be convergence among the taxonomies developed by different countries and regions, but one thing is for sure: they are here to stay…
According to the press website, Saving Endangered Species has wide and diverse aims: ‘to win new recruits, inspire biologists and conservationists already in the field, and illustrate the profession’s fundamental scientific tenets through wildlife champions’ own exciting narratives.’ Overall the purpose of the book is to present a moral imperative for a conservationist approach to saving nature and to do this through a collection of personal experiences from great conservationists about their love of nature and experiences from the day-to-day workings of conservation. Seven of the book’s contributors are winners of the Indianapolis Prize ‘the world’s leading award for animal conservation’ (p. 12) and one that prioritizes the inclusion of people as a ‘primary factor in the equation’ of conservation, and high levels of exposure in celebration of these ‘heroes and role models’ (p. 13).
The book is stunning. It is an aesthetically beautiful edited volume from its entrancing animal photographs, skilled illustrations and colloquial snapshots of its famous contributors. And yet, for all its beauty, this book could have been titled, ‘White People and the Animals they Love.’
I start with my fundamental critique because for some readers, this will be all they need to hear to check this book off their ‘must read’ list. These readers, however, will be hard pressed to find other works of conservation biography that aren’t also easily critiqued for their class, racial, gender, and geographical elitism.
Also, a disclaimer, I am a social scientist who works in some of the policy spaces, ‘partnership’ imaginaries of business and helping, and geographical areas covered in this book. Thus, I am among the ‘to be inspired’ of the intended audience for this book. Additionally, the introduction, written by Dr. Robert W. Shumaker (evolutionary biologist, president and CEO of the Indianapolis Zoo) calls for ‘a more integrative approach in which the centrality of humans is recognized in the conservation agenda’ (p. 6). Thus, a review by a scholar of humans might be reasonably appropriate.
In spite of the fact that the index does not include the term ‘celebrity,’ the book epitomizes what has come to be called ‘celebrity environmentalism’ (see Abidin, et.al 2020). The practice of scientists, film stars and social media influencers among others, who ‘enjoy public recognition, publicly support environmental causes, and benefits from their sustained public appearances’ as celebrity environmentalism may be a way of bringing new resources to conservation.
The celebritized approach to conservation is clear from the Introduction’s start. While the reader might expect the star of this chapter to be the American Bison, named the official mammal of the United States in 2016, and depicted as a steadfast and grandiose being in the illustration that precedes the text, it is not. The star is the celebrity conservationist William T. Hornaday who initiated the first-ever zoo-based conservation effort as a result of his initial desire to provide a live bison model for better taxidermy (p.2). Thus, the scientific model for which the book collects a series of testimonies, is linked to the efforts of Hornaday. He was the director of the Bronx Zoo in 1906 when Ota Benga, a Mbuti man from Congo, was displayed in a cage in the monkey house. Hornaday wrote to the New York city mayor that ’When the history of the Zoological Park is written, this incident will form its most amusing passage.’
Many people at that time, such as the Black clergyman Rev. James H. Gordon, were not amused. Many readers today will question the unambiguous celebration of these violent and dehumanizing roots of a movement intended to provide a moral approach to saving nature.
Distinctions are signaled between the scientific authors and the celebrity environmentalists through engraving the masthead of every other page with a ‘Dr.’ before the scientists, with other names presented title-less. Yet, these contributors are all performing the limited scripts of celebrity environmentalism: notably contributions enact specific tropes outlined by Abidin and her colleagues. We see contributions from the ‘Ambassador’ trope of high-profile performers who are patrons of NGOs and foundations, but whose personal commitment varies between superficial co-branding and long-term engagement. Quite prevalent is the ‘White Savior’ trope in which ‘wild places’ need to be saved from ‘locals’ through the actions of white people. The book also highlights the ‘Activist Intellectual’ trope promoting cerebral and scientific reasons to support conservation, that then become celebritized through a focus on funding, media and elite networking. Finally, the book’s promotional writing enacts the trope of the environmental ‘Entrepreneur’ where conservation is meant to provide a good investment for business-minded people.
The book opens with a long vignette from Harrison Ford at the 2018 Gala celebration referring to his co-contributors and others like them: ‘You can call them researchers or scientists or conservationists. But let’s call them what they really are: These are heroes. Real heroes.’ (p. 17). However, as this book shows, the heroic narrative structure makes forging alliances and political solidarity across lines of class, race, cultures and politics quite challenging. Heroes stand above others, they are exceptional. And, as such, conservation through heroism is unsatisfactory, if not oxymoronic.
Conservation and the environmental politics that can sustain life on our planet call for less singularity, fewer stories of individuals excelling over other people and nature, and more connectedness, cooperation and coexistence.
The introduction tells us that ‘these are the voices of the greatest conservationists of our time’ (p. 17). I have no reason to doubt that these are their voices and that they are great conservationists, whatever criteria make up ‘greatness’. The stories are full of passion and genuine concern for conservation, so there is no doubt that these heroes are acting from noble intentions. However, the heroic hubris prevents the reflection over either why chickens when pushed off a roof don’t ‘progress well in flight’ (p. 21) or why ‘with no prior thought’ wildlife conservation should be best achieved through ‘a big cash award’ and an ‘exciting and glamourous event’ (p. 305).
With some notable exceptions, this book presents the same old stories of great men who just happen to have no reproductive obligations (with the predictable exception of the female scientist), so they can go singularly or with the support of a doting wife into long-term relationships with animals.
These men also have friends with lots of money and political clout, and the documentation of elite networking practices that comes through in the chapters actually works counter to a singular hero at the helm of conservation. Finally, these conservation heroes rely heavily on a competent staff of Black and Brown people who can put lofty ideals into practice, while not usurping the limelight from celebrity environmentalists.
Some of the more ‘Activist Intellectual’ celebrity environmentalists present compelling arguments in lively texts around global warming and the contentious politics of saving the polar bears. Many of them take the reader through a combination of wildlife daily habits, international fundraising, and management of research and training projects. These are narrated as a partial life-history of a single ‘hero,’ and while there are nods to ‘local supporters,’ ‘scouts’ and collaborations between ‘enthusiastic’ local staff and international volunteers, this book tells a dangerous single story.
It’s time to remind ourselves and our peers that the heroic narrative of celebrity conservation may be useful for raising funds from businesses and for garnering the attention of bored bureaucrats, but it has dangerous political consequences.
A close reading of the text finds examples such as four ‘community game scouts,’ the ‘local African supporters’ in Kabara, and the ‘young Samburu warrior’ who was ‘walking in the bush’ with David Quammen, a writer from National Geographic (p.80). Samburu people have proper names, no less notable than people from Cincinnati, and the young man was not working as a warrior when assisting on a conservation project. These people are being rendered mundane through the repetitive text of the white savior narrative. They are being de-humanized as they remain in the background of the African or Asian ‘habitat’ for animals. The heroic narrative is based on an ongoing history of inequality between races, classes, genders and cultures.
The afterword, written by the CEO of the Indianapolis Zoological Society (2002-2019) reads like advertising copy for ‘Western Civilization’ complete with God, Guns and Gold. It is a colonial vision of men like Paul Erlich in which the ‘dangers of unchecked human population’ are called out as problems while fossil fuel addiction, or all those flights to the Galas celebrating conservation heroes, are left unmentioned. The ‘Danger of a Single Story’ by Chimamanda Adichie taught an important lesson in 2009: ’The single story creates stereotypes, and the problem with stereotypes is not that they are untrue, but that they are incomplete.’ This is a beautiful book in its intentions and its aesthetics; the stories are often compelling and transport us into the lives of cranes and elephants and into some of the world’s most notable conservation initiatives. Yet, despite its intentions, the people are missing from this heroic script of celebrity environmentalism.
Perhaps these people are left-out by design. Dr. George B. Schaller writes clearly: ’My account here demonstrates that conservation is not part of development’ (p. 78). But, conservation is part of development. It is impossible to define conservation otherwise (Adams 2004). Both conservation and development are part of the holistic process of living sustainably on our planet. This book is intended to celebrate ’people as a primary factor in conservation.’ We do learn a lot about a particular sub-group of privileged people, their psychology and insecurities, their dreams and aspirations, about networks of elites across the globe who happen to have farms, foundations or PhD scholarships to spare. But we learn far less about the non-celebrity people in the lives of animals. Surely a global conservation movement that manifests the holistic visions and ’the connectedness of all living things’ (p. 119) that many of these contributions also embrace, needs less heroism and single stories and more solidarity, comradery and complexity.
Lisa Ann Richey is Professor of Globalization at the Copenhagen Business School. She works in the areas of international aid and humanitarian politics, the aid business and commodification of causes. She is the principal investigator on the Commodifying Compassion research project. https://www.lisaannrichey.com
The sustainability contributions of business are under increased scrutiny in society. Observations of greenwashing, blue-washing, corporate hypocrisy, and decoupling suggest the existence of an intentional or unintentional gap between espoused CSR strategies and actual sustainability outcomes at the societal level. In other words, there seems to be more “talking” than “walking”.
This has inspired a growing concern in parts of the CSR research community that maybe we have been asking the wrong questions. Is it possible that in some ways we are contributing to this gap between strategy and impact?
Next year, an entire subtheme of the annual European Group for Organisational Studies (EGOS) conference will be dedicated to “Rethinking the Impact and Performance Implications of CSR”. This subtheme will address the tendency in CSR research to focus on outcomes at the organisational level without analysing impacts at the societal level.
There are valid reasons for limiting the scope of CSR research in this way: from an organisational performance perspective, many of the traditional success criteria for CSR policies—such as strengthening legitimacy, market position, and employee satisfaction—do not require data to be gathered on sustainability impact from a societal perspective.
However, the urgency and magnitude of the current global crisis related to climate, biodiversity, and social inequality fuels the expectation that corporations should acknowledge their role in creating these crises and take decisive action to be part of the solution. From this perspective, one would expect CSR research to provide knowledge of how, when, and why CSR policies and practices truly contribute to solving sustainability challenges. Yet, as a review of current CSR literature shows, this is rarely the case [1].
So what constrains CSR researchers from addressing this impact gap? In the following, I will highlight two interrelated mechanisms that have emerged from my research.
1) Sustainability impact is non-linear, systemic, and complex.
The problem with measuring sustainability impact is that it does not conform to conventional systems of measurement and reporting. Company CSR reports primarily provide key performance indicators linked to resource use per unit of production or list company policies and protocols to ensure compliance with various sustainability standards. In general, companies tend to (self) report on the successful implementation of their (self-imposed) CSR strategy, which happens to align with existing business objectives. However, as dryly noted by former environmental minister and EU commissioner Connie Hedegaard: the need for CO2 reductions is not relative; it is absolute! The melting Arctic poles do not really care that a company has made an effort to reduce its relative emissions if the net result is still more CO2 [2].
The negative impact on ecosystems is subject to irreversible tipping points where effects compound and accelerate. Thus, the societal impact of a sustainability policy or protocol cannot merely be assessed at the organizational level. It must be traced up and down the value chain and checked for unintended systemic consequences and hidden noncompliance [3]. Think of ineffective emission off-set schemes or families impoverished by bans on child labour. Ultimately, being “less bad” does not necessarily amount to being good.
2) Researchers do not have the necessary information.
Analysing the societal impact of corporate CSR policies and practices is a highly resource intensive task, which requires an entirely different set of research skills and data access than traditional organisational research. Instead, researchers most often opt to evaluate sustainability performance through estimations, perceptions, and narratives offered by company staff in surveys and interviews [1]. This data is context specific and prone to subjective biases, making it difficult to draw objective conclusions about societal impact.
Consequently, because there is so little existing knowledge of the link between CSR initiatives and societal impact, the CSR contribution of corporations is primarily assessed based on compliance with reporting standards and commercial rating initiatives such as the Dow Jones Sustainability Index[4]. This, for lack of better options, becomes the go-to objective indicator of CSR performance used by CSR researchers. Through this self-fulfilling circular logic, these indicators are used to identify CSR high performers for research on best practice. CSR research thus potentially perpetuates the perception of what successful CSR policies and practices look like—all without examining the societal impact of these practices.
Is this a problem?
Just as corporations increasingly realise that addressing CSR issues is no longer optional, we as CSR researchers may need to move beyond asking how, when, and why corporations engage with sustainability and begin asking how, when, and why corporations contribute to sustainability. If we do not, we risk losing our relevance when corporations look to academia for guidance on how to design and implement CSR strategies based on maximum impact rather than just maximum compliance and minimal risk.
We are challenged to expand our field of enquiry and be innovative when assessing how the observed means ultimately align with desired ends. This will require forging research alliances with new knowledge fields and establishing relationships with new groups of informants beyond company employees. The first step, however, is to rethink the questions we ask.
Rikke Rønholt Albertsen is a PhD Fellow at the Department of Management, Society and Communication at Copenhagen Business School and a member of the multidisciplinary CBS Sustainability Centre. Her research focus is on exploring and understanding gaps between the espoused sustainability objectives of corporations, and their actual contribution to sustainability. She has a background in consulting at Implement Consulting Group and in sustainability advocacy as co-founder of Global goals World Cup.
Business firms worldwide are increasingly engaging in practices of corporate social responsibility (CSR), a trend strongly driven also by the agenda of the UN Sustainable Development Goals. However, when doing CSR, firms tend to face recurrent suspicions by the media, NGOs, and other civil society actors that they would not put the money where their mouth is; in other words, that they would adopt CSR practices only ceremonially rather than substantially (a.k.a. “greenwashing”).
High transparency demands are commonly seen as the main ‘remedy’ that would ‘cure’ firms from mere ceremonial adoption and would drive them towards substantive adoption of CSR practices. However, in recent years we can find increasing evidence that high transparency demands do not always lead straight to CSR paradise. In a Financial Times article from 2020, Jason Mitchell raised the provocative question: Is greenwashing a necessary evil? The author argues that firms often require some leeway to experiment with CSR and sustainability practices to begin with, and without such leeway CSR efforts tend to get cut off too early by too high transparency demands and greenwashing accusations. After all, some decoupling between talk and action can also be due to a time lag between aspirations and the actual implementation of CSR practices within a firm (see here).
In the same context, Patrick Haack (HEC Lausanne), Dirk Martignoni (University of Lugano), and Dennis Schoeneborn (Copenhagen Business School) have recently published an article in the Academy of Management Review that draws on a computer-based simulation to study the dynamic interplay between transparency demands and CSR practice adoptions in a field or industry. By drawing on a probabilistic Markov chain model, the authors demonstrate that under certain conditions a regime of opacity followed by transparency (i.e. intially low and later high transparency demands) “outperforms” a regime of enduring transparency (i.e. high transparency demands right from the start) with regards to maximizing the share of firms in an industry that would adopt CSR practices in a substantive way. But what are such boundary conditions?
In the article, the authors explain that the optimality of the “opacity followed by transparency” regime tends to apply only for practices that are characterized by low adoption rates (i.e. those costly to implement) as well as by low abandonment rates (i.e. once adopted firms tend to stick with the practice, also since they may face public backlash if they abandon a practice after adoption). Interestingly, these are exactly the kinds of conditions that characterize CSR as a practice area.
What to learn from all this? NGOs and other civil society actors can benefit, in the long run, from cutting business firms some slack (i.e. putting rather low transparency demands onto firms), at least in the initial stages of CSR adoption processes. Instead, societal actors should then try toincrease transparency demands at later stages in the adoption process to push firms further towards substantive adoption.
Haack et al. (2021) explain this process to work due to what they call a “bait-and-switch” mechanism of CSR practice adoption. Initially lower transparency demands allow for larger numbers of firms to adopt practices, even if they do so for ceremonial reasons to begin with. Importantly, when transparency demands are then increased over time, a number of firms tend to switch from ceremonial towards substantial adoption, thus leading eventually to the desirable outcome (from a societal viewpoint) of rather high rates of substantive CSR adopters in an industry.
You can also access a (non-layouted) version of the same article at ResearchGate. The article has been picked up in a recent story by Forbes magazine. And if you want to learn more about the ‘backstory’ behind the AMR article, you can watch a video interview with two of the authors, Patrick Haack and Dennis Schoeneborn, on YouTube.
About the author
Dennis Schoeneborn is a Professor of Communication, Organization and CSR at Copenhagen Business School and a Visiting Professor of Organization Studies at Leuphana University of Lüneburg. In his research, he focuses on organization theory, organizational communication, digital media and communication, corporate social responsibility and sustainability, as well as new forms of organizing.
Corporate scandals caused by unethical behaviour can have dramatic consequences for a company’s bottom line. The Volkswagen emission scandal created a financial damage of over 45 billion US dollars thus far. The Enron accounting scandal ended in the company’s bankruptcy back in 2001. Most recently, the #MeToo movement has brought to light sexual harassment at the Weinstein Company, Fox News and Uber, to name just a few, all subject to payments of significant fines. How can we explain such scandals and what can companies do about it?
Why good people do bad things
In general, when we think of bad behaviour we think of it as a matter of bad character: bad people do bad things. But research tells us that this is view is misguided. Normally, employees involved in unethical behaviour have high moral values and good intentions, in line with their companies’ sets of ethical standards. Yet, their behaviour can deviate significantly from personal and organisational principles.
In fact, the moment they engage in unethical behaviour, they might not even realise that they are doing the wrong thing.
Context matters in explaining such ‘ethical blindness’. Environmental cues in the workplace, like monetary signals, trigger the adoption of a business decision frame, whereby people favour self-interested choices over ethical behaviour without necessarily being aware of it. By applying mechanisms of moral disengagement, they think that they are doing the right thing, while in fact acting unethically. For example, they may justify their detrimental conduct by portraying it as serving a socially worthy purpose, which makes them temporarily blind to the harm they are causing.
Building a culture of control does not solve the problem
In response to issues of moral misconduct, companies usually tighten their internal control systems. They strengthen the requirements for ethics trainings by making them mandatory and introduce monitoring and surveillance systems. They also try to incentivise ethical conduct through rewards and punishments. However, these instruments do not always lead to the intended behavioural outcomes and instead might even aggravate wrongdoing. This is because such instruments send signals that reinforce the adoption of a business decision frame, which is prone to moral disengagement. For example, in the case of Volkswagen, a CEO who led through fear and bound high expectations for engineer development to tempting bonus payments encouraged employees to circumvent the rules by engaging in emissions cheating.
Nudging – beyond carrots and sticks
To promote ethics in the workplace, building a culture of fairness and trust is pivotal. Nudges are instruments that align with these principles. They do not mandate or forbid choices nor do they meaningfully alter the financial incentives related to various behaviours. Instead, by considering the psychology of decision-making, they try to gently guide people towards certain outcomes while preserving their freedom of choice. Nudges do so by subtly altering the context (choice architecture) in which humans make their decisions. Examples include default settings or social norm feedback as well as the simplification of information or the framing and priming of messages.
While initially mostly applied by governments to steer the behaviour of private citizens or consumers, more and more companies are relying on nudges to improve the choices of their employees.
JP Morgan, for example, uses proprietary algorithms to predict unethical trading behaviour before it occurs. Traders then receive pop-up messages prompting them to reconsider transactions when they are at risk of breaking the rules. Scientific studies further support the power of nudges in form of photos of close others or moral symbols at the workplace that encourage employees to adopt an ethical decision frame, which helps them to act in line with moral values. Overall, while much remains to be explored when it comes to ethical workplace nudging, the gentle steering tool seems to provide a promising route for improving behavioural ethics outcomes in organisations.
Palazzo, G., Krings, F., & Hoffrage, U. (2012). Ethical blindness. Journal of Business Ethics.
About the Author
Leonie Decrinis is PhD fellow at Copenhagen Business School with research interests in corporate social responsibility, sustainability governance and behavioral sciences. Her PhD project focuses on applying behavioral insights to corporate sustainability in order to align governance objectives with organizational behavior.
According to a recent analysis by Datareportal, the number of active social media users grew globally by 13.2% from January 2020 to January 2021, which means that as of January 2021, there are 4.2 billion active social media users. With the increasing use of social media, it only makes sense that important discussions are moving to these platforms. This is especially seen during political elections, but social media are also becoming some of the most important platforms to discuss issues such as gender equality, racism, and climate change. However, while we have seen the potentials of social media for raising awareness about these issues, it is still unclear whether social media are suitable platforms for such discussions.
Throughout my research, I investigated the climate change debate on Twitter, and I want to highlight two important patterns that I found, each illustrating some of the potentials and challenges with the use of social media to discuss global challenges.
The potentials
On the one hand, I found that the debates on social media platforms are characterized by equality and inclusiveness. It is common knowledge that everyone has a voice on social media, and anyone can contribute to a debate, but simply having the opportunity to contribute does not mean that everyone will have an impact.
Interestingly, what I found was that not only can anyone contribute – everyone can have an impact on the debate and affect how issues are discussed.
This both includes users with less than 100 followers and minority voices such as climate change skepticism. Seeing that even smaller users and minority voices can have an impact is particularly interesting on social media, where it has been argued that it is only the “popular” accounts, influencers, or central actors that shape the debate. Naturally, this does not mean that everyone will influence the debate, but it means that anyone can, which I see as an important part of creating a good place for discussing global challenges.
The challenges
On the other hand, I found that the use of Twitter to discuss climate change rarely included ongoing dialogue.
There is very little exchange of opinions between two participants – instead, participants share their thoughts by engaging in broader conversations, e.g., by using specific hashtags or by mentioning central figures. In other words, what I found was that participants engage with an imagined audience, not directly with others.
Sometimes a discussion unfolds in the replies to a tweet or in the comments to a Facebook post, but the vast majority of contributions to debates about global issues are more about voicing an opinion, e.g., through retweeting, not back-and-forth dialogue between participants. This means that while most participants actively contribute to the debate, there is rarely any direct response to these contributions, which is a critical challenge, as I see some form of back-and-forth exchange of opinions as an integral part of good discussions.
So, are social media platforms good places for debates about global challenges?
Well, yes and no – and naturally dependent on how you define a “good” debate. The inclusiveness and equality are great, and this is unparalleled compared to offline arenas that are limited by time and space, thus highlighting the potential for social media to empower citizens, both in their role as ordinary citizens and as consumers or activists that challenge corporate behavior. On the other hand, the distinct lack of ongoing, reciprocal exchange of information or dialogue is a critical challenge, highlighting issues with using social media to debate global challenges. This poses an interesting puzzle.
The lack of dialogue suggests that we need to be careful about using social media platforms to discuss global challenges.
Still, the use of social media to discuss global challenges is rapidly growing. Hence, we cannot disregard the importance of social media, but perhaps we can re-think their role in global discussions.
I suggest that we move away from the expectation that social media platforms, by themselves, cultivate high-quality debates and instead see them as platforms that mainly inform and develop participants’ views. Hence, rather than providing platforms for dialogue, social media contributes to global debates by providing platforms where participants can become informed and better prepared for subsequent discussions – discussions that often unfold outside social media platforms. In other words, while social media, by themselves, are imperfect places for debates about global challenges, their role in informing participants, including both citizens, corporations, and politicians, illustrates that social media are a critical part of a more extensive media system, and we should not disregard their importance in debates about global challenges.
A word of caution
However, if we accept that social media mainly serves to inform participants, we also have to consider that some potentials can become challenges. Specifically, the equality found in the debate can become a serious issue.
Without the ongoing dialogue, we miss opportunities to contest and challenge disruptive voices such as climate change skepticism.
Hence, while climate change skepticism, in an ideal and high-quality debate, could be beneficial by inspiring others to improve their arguments and refine opinions, the lack of dialogue on social media means that such voices are not contested and are not inspiring others to improve their arguments.
This is even more important with the increasing polarization we see on social media and highlights that if social media mainly serves to inform participants’ views, there is a greater responsibility on us as participants. Specifically, we still need to seek out these opposing opinions. Even though it might be futile to engage with those opinions, seeking out these opposing views may still inspire us to improve our arguments and, in some cases, even inspire us to refine our own opinions and ideas.
About the Author
Daniel Lundgaard is a PhD Fellow at the Department of Management, Society and Communication at Copenhagen Business School. His research investigates how communication on social media (e.g. the use of emotions, certain forms of framing or linguistic features) shapes the ways we discuss and think about organizational and societal responsibilities.
The shocking 2021 IPCC report on the climate emergency makes clearer than ever that many human systems are in dire need of significant change. Today’s harsh growth-oriented economic systems are particularly implicated in the growing chorus of demands for purposeful system transformation towards a flourishing world for all. Significant systemic transformation is needed to bring human activities in line with both social and planetary boundaries now being breached. That means that the way we think about economics, how our businesses operate, and even how communities and whole societies operate likely need to change – and radically.
But transforming such whole systems – economies, societies, communities, even organizations – is incredibly hard. Transformation inherently involves fundamental changes to core aspects of a given system. Things like purposes, values, goals, important assessment metrics, and even the mindsets or paradigms of people in the system must change, whether the system to be transformed is an organization, economy, or society. Our research suggests that a new type of entity – transformation catalysts – may be able to help.
What is a Transformation Catalyst?
A chemical catalyst brings about a chemical reaction without necessarily changing itself. Used in a social sense, a catalyst is a person or thing that makes something new happen or precipitates change. In the spirit of any catalyst, a transformation catalyst works with the mix of different efforts and activities that already exist and that are geared towards significantly changing a system – transformation. When this mix of change efforts, which is usually fragmented with different activities operating in separate silos, is organized, it can become a transformation system. Organized as a transformation system, these activities can be much more effective at producing desired change.
The transformation catalyst’s role is to bring together an array of efforts so that together they can emerge or develop new ways to do their work more effectively – that is, operationalize the transformation system.
We like to say that transformation catalysts connect, cohere, and amplify transformation efforts that are already underway. Four catalytic actions make this coherence and amplification of efforts possible: seeing, sensemaking, connecting, and radical action and learning.
The Four Catalytic Actions
Seeing means helping change agents figure out what their emerging transformation system is all about and who is doing what, where, and how. Seeing involves various forms of stakeholder analysis – figuring out who is in the system, which can use a variety of approaches, including interviews and mapping tools to identify key participants, resources, and system dynamics. Doing so helps participants identify where gaps and possibilities exist to create more effective action.
Sensemaking means creating a shared and coherent vision among various participants to, quite literally, make new sense of their actions and system, and tell new stories about it. These new, more powerful framings can have broad appeal to draw in other participants, raise funds, and create energy moving forward. Sensemaking also means helping participants understand how to pull together into a coherent transformation system so they can act in new ways to take more effective action.
Connecting is the process by which actors learn about each other and begin to devise new ways of acting more coherently together. Connecting involves aggregating, cohering, and, ultimately, amplifying efforts that may already be underway, but have not been as effective as desired to date. Connecting can mean creating a shared set of aspirations and identity and awareness of their own efforts as part of a broader transformation system. Then they can learn from those actions – the radical action and learning process.
Radical action and learning needs a safe space, so that participants in a transformation system can question, explore, analyze assumptions, and experiment with new ways of doing things that are transformative. Experimentation is crucial, since transformation is unpredictable by its very nature. Mistakes will be made, and things will not always work out as planned. Sometimes creating prototypes can be helpful, too, as a kind of testing ground for further action.
Catalyzing Change through 1000 Landscapes for 1 Billion People
One example that we describe in our paper is that of 1000 Landscapes for 1 Billion People. 1000 Landscapes is an initiative creating sustainable solutions by recognizing that long-term sustainability means emerging a shared foundation of land and water resources for all.
In its early stages, 1000 Landscapes consulted with more than two dozen landscape partnerships globally to figure out who was doing what (seeing). They identified what the barriers were to managing landscapes in new ways were (sensemaking).
1000 Landscapes is now building collaborative capacity for holistic landscape management in many different places, starting with an initial group of 20 and growing the number over time (connecting). Holistic land management means, as the initiative states on its website, “integrating action for food, water and health security, sustainable livelihoods, biodiversity conservation, climate action, and the transition to inclusive green economies” (sensemaking).
1000 Landscapes plans to expand to 50 areas in its second phase (amplifying). Its goal is reaching at least 1000 landscapes “meeting locally defined development and environmental goals, with benefits for over one billion people” by 2030 (amplifying and radical action). 1000 Landscapes even uses the language of catalysis to describe its work: “working in radical collaborations with dozens of organizations to catalyze system change”. It thereby “unlock[s] the transformative potential of inclusive landscape partnerships and to scale their impact”.
The Mantra for Transformation Catalysts
The key to understanding transformation catalysts is knowing that they themselves are not doing the actual transformation work. Instead, they are helping to organize other change agents who are already doing that work in new ways so that they can become more effective. Indeed, they are helping them to become effective transformation systems with the potential to overcome the many inertial forces that hold systems in place.
Small, fragmented, individual efforts cannot achieve that type of scale impact. But the potential that transformation catalysts bring is the ability to bring those actors together in new ways. They can help change agents see and understand new, radical possibilities for transformative change if they can act coherently together. Then they can amplify their own efforts by figuring out where the gaps in their transformation efforts are, filling those, sharing resources when appropriate, and acting more effectively.
Connect, cohere, and amplify. That is the mantra for transformation catalysts.
Sandra Waddock is Galligan Chair of Strategy, Carroll School Scholar of Corporate Responsibility, and Professor of Management at Boston College’s Carroll School of Management.
Steve Waddell is founder and co-lead steward of Bounce Beyond, a transformation catalyst oriented to changing towards transforming towards next economies.
In a landmark verdict at the district court in the Hague on 26th May this year, Royal Dutch Shell lost a case to the Dutch branch of ‘Friends of the Earth’, Milleudefensie, and other NGOs. The court ordered Shell to reduce CO2 emissions by 45% by 2030 against a 2019 baseline. The decision breaks new ground for the possibility of holding private corporations accountable for climate change – Shell-shocked and a Black Wednesday for the fossil fuel industry, according to expert commentators in international environmental law.
The verdict emphasizes the international consensus that corporations like Shell must respect basic human rights, such as the rights to life and family life. In the ruling, human rights are seen in the context of climate change and the aspirational 1.5-degree target stated in the Paris Agreement (2015), scientifically supported by the Intergovernmental Panel on Climate Change (IPCC 2018).
The verdict is a significant example of a general surge in climate litigation cases globally in which human rights are invoked.
Holding a fossil fuel company accountable based on the standard of human rights might sound as futile as the effort to mix oil and water.
And this sort of skepticism has roots in the recent history of attempts to connect business, human rights and climate change in what could be seen as a ‘bizarre triangle’ of irreconcilable corners.
However, the Shell verdict can be seen as a firm rebuttal to such skepticism. The court argued that Shell had violated the standard of care implicit in Dutch law. To clarify the content of the standard of care, the court used the United Nations Guiding Principles (UNGPs) which provide a global standard for businesses’ human rights responsibilities. This is, however, a bold interpretation in light of the UNGPs silence on human rights responsibilities with regard to climate change.
In fact, human rights might not fit so neatly with the difficult case of climate change. Firstly, it is difficult to trace the causal links between the emitters and the victims of climate change, although this is contested by recent studies that have traced two-thirds of historical emissions to the big oil and gas companies, the so-called carbon majors.
Secondly, human rights basically apply only to the state’s duty to protect citizens, and thus only indirectly to private companies. This state-centric approach is core to the human rights regime and tradition, and the UNGPs uphold this by allocating less stringent responsibilities to non-state actors such as corporations.
However, the UNGPs also state that private companies have human rights responsibilities independently of the state. The district court in the Hague reaffirms this in its ruling against Shell, stating that corporate responsibility “exists independently of States’ abilities and/or willingness to fulfil their own human rights obligations, and does not diminish those obligations. [..] Therefore, it is not enough for companies to [..] follow the measures states take; they have an individual responsibility.” (4.4.13).
A third source of skepticism resides in understandings of environmental law and the central role of the polluter pays principle. Accordingly, emitters are responsible for their historical output of CO2 as enshrined in the United Nations Framework Convention on Climate Change (UNFCCC 1992), but the scope is usually taken to be limited to the unit of production (scope 1), e.g. the refining of crude oil. The standard view of pollution is local, as for instance when a factory pollutes the local river.
However, in the Shell ruling scopes 1, 2 and 3 are taken into account, meaning that consumers’ incineration also counts and therefore Shell must take responsibility for consumers’ emissions as well. The consequences of including all three scopes incur far-reaching and demanding responsibilities on corporations, where previously the distribution of responsibilities between producers and consumers has been disputed, for instance in the carbon majors case.
In sum, the Shell verdict raises the bar considerably for the expected level of corporate climate responsibility. The verdict also challenges the assumption that human rights don’t fit the complexity of climate change; though in fact the UNs first resolution on human rights and climate change appeared back in 2008. Moreover, the verdict goes against the widespread liberal assumption that businesses’ responsibilities are mainly to comply with the law of national jurisdictions and that consumers are comparably responsible for causing climate change.
It might be time to rethink such assumptions and not simply continue ‘business as usual’ by seeing climate change and human rights-based climate litigation as a managerial risk factor to be handled instrumentally and in isolation from the moral duty to solve the climate crisis.
One key lesson could be to acknowledge that corporate responsibilities are not just legal but moral as well, since the distinction is not so clear in soft law instruments like the UNGPs nor even in the notion of human rights themselves, not to mention the moral demands following from the need to respect and realize the targets of the Paris Agreement and related transition paths.
When the Special Representative to the United Nations on Business and Human Rights, John Ruggie, started exploring pathways for developing the field, he was inspired by the American philosopher Iris Marion Young whose ‘social connection model’ of global responsibility in supply chains suggests a forward-looking kind of responsibility for mitigating structural injustices. Young’s notion of responsibility was designed to solve large-scale structural problems like climate change by attributing responsibility to all agents according to their powers, privileges, collective capacities and level of complicity.
This is the kind of thinking now supported in the court verdict against Shell, and it signals a new beginning where climate change reconfigures how corporations and human rights connect… perhaps making the ‘oil and water’ metaphor obsolete.
Acknowledgements
Among the many expert commentators, Annalisa Savaresi’s work provided particular inspiration for writing the blog. I am grateful to Florian Wettstein, Sara Seck, Marco Grasso, Ann E Mayer and Säde Hormio who all gave comments to my article ‘Climate change as a business and human rights issue’ published in the Business and Human Rights Journal (2020) 5(1), pp. 1-27. The blogpost is based on the approach of this article. Julie Murray was helpful with proofreading.
In recent years, through experience and discussions in various projects and workshops dealing with urban development, this key question keeps returning:
How to best promote citizen engagement?
While citizen engagement is a large topic within urban development, so are entrepreneurship and grassroots movements. How do we perceive these various terms? In which ways do these forms of organization converge, where do they diverge? More importantly, could we change the civic engagement rates if this work would be perceived as steps towards further opportunity (gaining) instead of ‘volunteer work’ (giving)?
A known challenge within citizen engagement deals with age groups. It is not difficult to engage young children (up to 12 years old) and older citizens to take part in local actions, however it becomes a struggle to engage youth and young adults as they see little return in value as results tend to be intangible or unclear. Within this group, perception plays a big role in how ideas are sold (and consumed), so it might be time to possibly bring the concepts of civic engagement and entrepreneurship closer together. But where do we start?
A first point to consider is how these key concepts might be popularly understood. When mentioning citizen engagement, images of volunteers coming together to discuss, collaborate, work and vote on ideas come to mind. When talking about entrepreneurship, notions of highly driven visionaries or million dollar companies emerge.
Citizen engagement and entrepreneurship are rarely seen as equals. However, in both cases you find similarities. It is not uncommon for both groups to engage in a large amount of unpaid labour, long days, hard work and convincing people to join you and (most probably) gathering funds to execute whatever dream you may have.
Literature covering the concepts of social entrepreneurship or community-based entrepreneurship highlights distinct formats of social entrepreneurship, both of which are top-down. In the case of grassroots entrepreneurship initiatives, articles highlight movements that emerge from “acute socio-economic, institutional, and financial resource constraints, as well as out of local knowledge and a commitment to community”, such as the one seen recently during the Covid-19 pandemic (see blogpost). It is not necessarily about creating something new, but instead, something that works for the case in focus.
In these settings, co-creation has received a deserved attention as a method, and it has proven to be a valuable tool as it allows for diverse stakeholders to come together to develop and carry out ideas, creating shared agency. However, before that first co-creation session lies the true challenge in both user engagement and entrepreneurship: Creating momentum before the momentum, to make one person (or a few) motivated ‘out of thin air’.
Therefore, a second point to consider is the top-down setup of projects, inviting citizens to engage with a specific topic or local pre-defined issue. Although project results might impact locals’ everyday, the personal gain might be too dissolved into the hours spent, thus people refraining from engaging.
In order to challenge the current top-down scenario, the perception and format of these activities could be transformed to facilitating processes to let locals themselves suggest and carry the types of projects that interest them, seeing a clearer link to ‘what’s in it for me’. For unpaid efforts, the pay-off has to be visible and tangible.
Furthermore, associations, municipalities and other public institutions need to create means to replicate successful bottom-up initiatives. Some of these initiatives could then be linked to local businesses and related opportunities.
From a service design perspective, a way to bring this information into people’s households could be to use the existing information channels popular amongst the local community to allow for an initial knowledge entry point. For instance, as citizens receive a public waste sorting information sheet, one could attach a ‘waste project opportunity’ sheet. This initial touchpoint could be a it’s your turn blueprint, a step-by-step guide showing what to do to bring your ideas out into the world. So, a project idea invitation presented as an opportunity at your fingertips. The ‘hot themes’ in the current market should be highlighted while also offering inspirational examples. Programmes to support these initiatives should be in place, facilitating the citizen engagement startup process as a possible social ladder. Such a setup could transform current structures, making cities and citizens, not venture capitalists, the true cradle for entrepreneurship.
This blog was inspired by a recent participation in a workshop focusing on urban development, discussing visions for green and social meeting places in urban residential areas. During the discussion, a number of key questions were raised concerning how to best promote citizen engagement. The workshop was organized by Copenhagen University and VIVAPLAN, with presentations from VIVAPLAN, Urbanplanen Partnerskab, C40, KAB and Copenhagen Municipality. The visions discussed during the workshop are to feed into policy recommendations for sustainable and inclusive developments in Denmark and Sweden.
Isabel Fróes is a postdoc at MSC Department at Copenhagen Business School working in three EU projects (Cities-4-People, iPRODUCE and BECOOP). Isabel also has wide industry experience and has worked both as a user researcher and service design consultant for various companies in Denmark and internationally. For more detail please see her Linkedin profile.
We live in politically tumultuous times. Authoritarianism is on the rise again across the world. Democratic freedoms have been in decline for 15 years in a row. The share of people living in free societies has shrunk to a meagre 14% of the world population. Meanwhile polarisation and populism, disinformation, mistrust and rising inequality have begun to hollow out the fundaments of even the strongest democracies. Votes for populist parties in mature democracies have risen from 3% in the 1970s to more than 20% today.
With democracy under attack everywhere how does and how should business position itself? What are the democratic responsibilities of companies? A tricky question well beyond the scope of a blog entry, but here some rather random notes and provocations on current trends and gyrations as input to this highly topical conversation.
Inaction is untenable, political neutrality unlikely.
It is less and less of a practical option anymore to hide behind a veneer of political neutrality no matter if rationalized instrumentally (the Republicans-are-buying-sneakers-too argument), normatively (it’s undemocratic for business to engage in high stakes politics beyond its own narrow business interests) or intuitively (the empirically tenuous claim that business tends to only support moderate, mainstream politics anyway). Here some reasons why:
For a start, it is not easy to find real-world contexts, where a principled commitment to free and fair markets and a principled rejection of crony capitalism would not also imply and indeed be predicated upon a commitment to competitive democracy. Or from a slightly different angle, the normative minimum for business – to respect human rights in its sphere of operation and influence –also entails respect for basic democratic rights and a related duty of care.
Remaining silent on democracy is therefore only an option as long as democracy is not in danger, as long as none of the substantive political forces in a country seek to actively dismantle load-bearing democratic norms and rules.
Yet in many countries this is not the case (any more). From Brazil to the Philippines from Poland or Hungary to the US, formally democratic regimes are under attack from within the political establishment. And in many more other countries fringe groups with dubious democratic credentials and intent often propelled by a toxic mix of populism and nativism are moving closer to becoming part of government.
Enter corporate democratic responsibility
Corporate responsibility in such contexts entails having a plan for and executing on corporate democratic responsibility on at least three different levels / time horizons.
For a start and most immediately it requires aligning non-market strategies with regard to corporate support for politicians, lobbying, public relations and other business and society interactions with an active stance and role in support of democracy. E.g. no funding for politicians and parties that have taken to destroying basic tenets of inclusive political participation (not just temporary bans until the PR tempest calms down), no lobbing on issues that corrode the fundaments of political equality, an active promotion of democratic values, for example along the lines of campaigns by German business associations against extremism.
In the medium term it calls for a democracy audit – an active interrogation of one’s own operations’ “democracy footprint”, and how one’s business model can best respect, protect and promote democratic values. Big tech platforms, for example, are being pushed to better understand and address their role for a healthy democratic discourse.
In long-term perspective it demands a deeper probing on how corporate conduct is linked to some of the underlying drivers of democratic decline and disillusionment. Growing inequality and declining social mobility, status anxiety and a profound sense of losing out and losing authorship of one’s life are all empirically confirmed to provide fertile ground for populism and creeping authoritarianism. To help restore a sense of individual economic and political efficacy, trust in societal fairness and public as well as private authority companies may wish to interrogate how practices around tax avoidance, regulatory arbitrage, shareholder primacy etc. intersect with these issues. This also includes questions around how reforms and new formats in corporate governance can help resurrect a sense of being in it together and revive the idea of the business organisation as a shared venture, an important venue for exercising citizenship and co-authoring one’s economic life world and, capable of collectively evolving a strong, responsible corporate purpose.
A rough, but necessary ride ahead
Good corporate democratic responsibility does not come easy. It means wading into a messy terrain and facing up to the perennial tension between defending democracy and curtailing freedom.
It involves business decisions on whether fitness-bikes should be permitted to spread rumours about voter fraud, whether couches and guest rooms should welcome riot tourists, whether rumour-mongers deserve cloud hosting or whether the president of the United States should be kicked off the world’s largest social network. Yet, all these things need to be reckoned with one way or the other as doing-nothing only cements a status quo of what is often democratic backsliding.
All these tricky questions around corporate behaviour in the context of democratic countries that are at risk of backsliding will also bring into sharper relief the perennial question of what companies can and should do when operating in outright authoritarian settings – a discussion well beyond the scope of this short blog entry but one that is returning with a vengeance given high-growth prospects in authoritarian settings or military coups in popular foreign investment destinations.
Finally, an honest grappling with corporate democratic responsibility will be agnostic to partisanship in principle and approach. But it is highly likely to be partisan in outcomes. Political incivility and anti-democratic behaviour are unlikely to be evenly distributed across the ideological spectrum in any given setting. So brace yourself for a partisan backlash and for a constant tight-rope walk between supporting democracy and being drawn into day-to-day politics. Getting this right will require the best of corporate strategy, corporate governance and corporate communication. But ultimately there is no escaping from corporate democratic responsibility. Flourishing economies and flourishing democracies ultimately depend on it.
About the Author
Dieter Zinnbauer is a Marie-Skłodowska-Curie Fellow at CBS’ Department of Management, Society and Communication. His CBS research focuses on business as political actor in the context of big data, populism and “corporate purpose fatigue”.
Carbon accounting provides a science-based measurement of greenhouse gas (GHG) emissions, achieving greater accountability of companies’ emissions causing global warming. GHGs are reported in CO2 equivalents (CO2e), meaning GHGs with widely different chemical qualities and environmental impact can be presented in a single understandable metric. However, the underlying methodology is debatable. This article questions whether the CO2e of Sulfur Hexafluoride (SF6) is misreported.
What is SF6 and why is it a hurdle for a green energy transition?
SF6 is used as an insulator in a wide variety of electrical equipment, mainly to prevent fires in incidents of short circuits. It is found in transformers inside windmills, offshore and onshore substations, and in power cables.
(Illustration to the left shows a sideview of a windmill turbine – Source: CAT-Engines.Right: an offshore wind energy system – Source: Nordsee One GmbH)
SF6 is a synthetic man-made GHG and cannot be reabsorbed naturally like CO2, meaning once emitted, it does irreversible damage. Most GHGs remain in the atmosphere around 100 years – SF6 remains for 3,200 years. These numbers are given by the Greenhouse Gas Protocol (GGP) based on calculations by the Intergovernmental Panel on Climate Change (IPCC).
The IPCC’s metric Global Warming Potential (GWP), reveals environmental harm of a given GHG in CO2e. What then, makes SF6 problematic when converted into CO2e? SF6 has a GWP 23,500 times higher than CO2 – a value that is difficult to comprehend. The GWP metric is calculated using a 100-year timeframe based on GHG’s environmental harm. Yet, SF6 has an atmospheric lifetime of 3,200 years, essentially leaving 3,100 years of environmental harm unaccounted for. Using a simple logarithmic function incorporating IPCC data accounting for the missing 3,100 years, the GWP almost doubles. As illustrated below, this indicates how SF6 may be misrepresented in terms of environmental harm in CO2e emissions reporting.
As found by AGAGE – MIT & NASA, other worrying trends are observed. The atmospheric concentration of SF6 has more than doubled in the past 20 years. Luckily, its current concentration in the atmosphere remains low relative to other GHGs such as Methane or Nitrous Oxide.
Regardless, the GWP of these two GHGs pales in comparison to the mindboggling detrimental effect of SF6 on the environment. Emitting this gas should therefore be strictly regulated.
Greenhouse Gas Emissions Reporting – Diverging Approaches
It only takes a little digging into offshore wind energy players to uncover diverging conversion methods of SF6 into CO2 equivalents (CO2e). The GHG emissions reporting methodologies of industry leaders use different emissions factors to convert SF6 into CO2e. An example of underreporting is illustrated by Vattenfall in their 2019 sustainability report, reporting SF6 as 15,000 times more potent than CO2. The emissions factor given by the GGP is 23,500. Ørsted uses a GGP emissions factor for the same gas in their 2019 ESG report. Yet, while Energinet also states it uses the GGP reporting framework in their 2020 CSR report, it uses an emissions factor of 22,800. The ownership distribution between Vattenfall and Ørsted in the Danish wind farm Horns Rev 1 of 40% and 60% respectively, thus blurs accountability and severity of reported emissions. As highlighted by the BBC, atmospheric concentration of SF6 is ten times the reported amount by countries. The IPCC and GGP are also aware of this.
During the past decade…actual SF6 emissions from developed countries are at least twice the reported values. (Fifth Assessment Report of the IPPC)
Measuring Impact of SF6 Leaks by Offshore Wind Players
SF6 emissions will rise exponentially alongside expanding electrified energy infrastructure using equipment containing this gas. This, together with repeated SF6 leaks, perpetuates the worryingly steep upward trend in atmospheric content of SF6 shown above. In 2020, Energinet reported a leak of 763.84kg SF6, or 17,950,240kg CO2e. The environmental impact of this leak is about the same as the emissions of 53 SpaceX rocket launches. Energinet has since admitted to years of underreporting of SF6, leading to amended SF6 emissions related to normal operations doubling.
Leaks of SF6 are too common. In Ørsted’s 2020 ESG report, a major leak at Asnæs Power Station was mentioned without disclosing the actual amount – withholding important risk-related data from investors. However, Energinet disclosed an SF6 leak of 527kg at that same facility in their 2020 CSR report. The leak for which Ørsted is responsible, yet feels is not material to disclose, is therefore potentially around 12,384,500kg CO2e. Indicating light at the end of the tunnel, Vestas has included SF6 on their Restricted Materials list since 2017, as well as introducing a take-back scheme for infrastructure containing this gas – setting a better example for business models of our green energy transition leaders.
Strengthening the Global Response to Climate Change Risk
It is vital that we understand SF6 is so detrimental to fighting climate change beyond 2100 that it has no place in sustainable business models today. Even if CO2 emissions are reduced in alignment with 2100 Paris Agreement goals, reporting in a 100-year timeframe will not save a planet billions of years old. GHG reporting must be better regulated and scrutinised in order to deliver a truly green energy transition. Releasing a gas causing irreversible damage cannot be an acceptable trade-off for a short-term “green” transition. While most company reports claim no alternatives exist, this is not true. Therefore, SF6-free equipment must be mandatorily installed.
A green transition goes beyond 2100, yet poor regulation enables energy companies to present SF6-CO2e favourably by using lower emission factors. Offshore wind energy players have not provided comparable, accountable, and transparent reporting – indicating stricter regulations on GHG reporting are necessary.
The Way Forward: Better Regulation
In 2014, an EU regulation banned the use of SF6 in all applications except energy after lobbyists argued no alternatives exist. The EU acknowledges the environmental harm of SF6, yet EU action has been described as inadequate. Asset managers, institutional and retail investors are exposed to hidden environmental risks related to SF6 in terms of double materiality. Double materiality referring to the financial costs related to management of SF6 incurred once completely banned. Non-financial reporting of GHG emissions and CO2e needs to be regulated far more than current global regulations. Investors, society, and most of all our environment deserves better protection.
NOTE: This article is based on a Copenhagen Business School (CBS) research paper in the course ‘ESG, Sustainable & Impact Investment’ taught by Kristjan Jespersen – Associate Professor at CBS – as part of the newly introduced Minor in ESG. The paper questions the greenness of wind energy by using the case of three large offshore wind energy farms in Denmark: Horns Rev 1 & 2 and Kriegers Flak. The findings are based on ESG, sustainability & annual reports from 2015-2019 of all involvedOEMs, manufacturers, operators, and energy grid providers. Implications of the findings point to a coming hurdle within the electrification of a global green energy infrastructure transition.
About the Authors
Esben Holst, an SDG and CSR research intern at Sustainify, is a Danish-Luxembourgish masters student at Copenhagen Business School. Besides attending the newly introduced Minor in ESG at CBS, his past studies focus on international business in Asia and business development studies.
Kristjan Jespersen is an Associate Professor at the Copenhagen Business School. He studies on 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.
Contestations of CSR across time, space, and experience … and a Call for Papers
By Jeremy Moon
◦ 3 min read◦
It is well known that globalization of business has thrown up a host of new governance challenges and new governance solutions. Conspicuous in this regard are the various ‘responsibility remedies’ for challenges posed in the supply chains of multinational corporations.
The growth and transformation of supply chains, particularly in agricultural products and garments has reflected a pattern of business expansion and penetration of host country markets. These have been followed by revelations of short-comings in the treatment of workers and communities, and in environmental responsibility. And in turn, these have been followed by responsibility remedies, often in the form of partnerships, international standards and multi-stakeholder initiatives.
Formerly, if corporations were asked to whom they were socially responsible they might well have answered ‘to their communities’ or ‘to their stakeholders’. The concept of responsibility to communities makes sense in an industrial model of production in which the company, its management and workers are united not only by association with the company but also by the place in which the company had its most obvious impacts. The concept of responsibility to stakeholders is premised on its offer of an alternative to exclusive responsibility to shareholders, combining an ethical and a functional logic. But with global supply chains, the concepts of community and stakeholder responsibility are stretched. In the former case this is to relationships with no face-to-face interaction or even common identity with place and culture. In the latter case it is to corporate relationships with workers who have no contractual relationship with the respective corporation, and may even be unaware that they are working in that corporation’s supply chain.
So we have witnessed numerous alternative models of supply chain responsibility often in the form of partnerships of businesses and civil society organizations, sometimes also involving local, national and international governments. The legitimacy of these partnerships, standards organizations and Multi-Stakeholder Initiatives (MSIs) is usually premised on some reference to, what are taken to be, universal principles, and on the plurality of participants, particularly those reflecting societal voice – ostensibly the surrogates of community and stakeholders.
But notwithstanding the legitimacy that these responsibility remedies initially attracted, research increasingly sheds doubts on their ability to resolve the responsibility question because they tend to obscure conceptions to whom and for what business is responsible for, and specifically by marginalizing representation from the global South – or the production-based economies of the supply chains.
In my own work, I have seen tensions between host governments and international remedies for oppressive labour standards, with the former regarding such ostensibly well-intentioned initiatives as subversive to their own authority. There are tensions between host country suppliers and international brands and retailers with some of the former going out of business for not readily complying with new standards or complaining that they bear disproportionate costs of factory upgrading. And there are tensions experienced by workers whether with their own governments for regulatory failure, with their immediate employers for low wages and poor conditions, or with international supply chains which structure their livelihoods. But these tensions are often not articulated by virtue of the weak labour organization (often compounded by political environments hostile to organized labour).
As a result from global South perspectives the new variants of the social responsibility model look ill-suited to the ‘on the ground’ economic, social and environmental challenges, at best. At worse, they look like a legitimization of a continuing model of exploitation.
How do individuals, groups and communities from various geographic and geo-political contexts experience the imposition of social responsibilities and practices from businesses of all forms?
How are social responsibilities and their related institutions and practices transformed, subverted and/or resisted within, across and outside of organizations and workplaces?
Moreover, the SI editors will also welcome papers on wider issues arising from the social responsibility of business, specifically to highlight perspectives borne of contextual experiences.
A Special Issue workshop will be heldon Thursday 16th September 2021 (applications by Monday 21st June 2021. To be considered for this special issue, full-length papers should be submitted through the journal’s online submission system between February 1st and 28th 2022.
For full details on the call, the workshop and the submission processes please follow this link.
About the Authors
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.
On behalf of the Guest Editors: Premilla D’Cruz, Nolywé Delannon, Lauren McCarthy, Arno Kourula, Jeremy Moon and Laura J. Spence; and the Human Relations Associate Editor: Jean-Pascal Gond.
To mark International Women’s Day 2021, the University of Bath’s Business and Society blog and Copenhagen Business School’s Business of Society blog have teamed up to present March for Gender. This month we will explore research focusing on gender, or research findings that have specific implications for women.
Here Pierre McDonagh and Andrea Prothero call out gender discrimination in the marketing academy. Their latest study, looking at gender representation in marketing’s academic journals, showed that women were significantly underrepresented on editorial boards, and that special issues and awards favour men over women. They use these disappointing findings to call for meaningful change, outlining how the problem could be addressed.
We decided to explore this important issue in our latest paper in the Journal of Marketing Management. We looked at gender representation in marketing’s academic journals, through three key areas – the gender composition of editorial boards, special issue celebrations and the awards process. This study is a continuation of a larger research project which examines ‘the development of feminist thought within marketing scholarship from 1993 to 2020’.
Our results painted a disappointing picture. It’s a sad indictment of our field that in 2021 the facts are as stark as they are. So, we think it’s important to pause at this point in the process, to empirically call out one major issue – gender discrimination within our academy.
We wrote about this as we believe many scholars might not realise what is happening in our academy and, as our recent paper suggests ‘it’s hard to be what you cannot see’!
Our goal is to get scholars in the marketing academy to think differently about things that are hidden in plain sight. We also want them to join us in asking for meaningful change with respect to existing gender discrimination in the marketing academy.
A sad indictment of the field
For this study, we examined the gender composition of 20 leading journals [i], considering Editor-in-Chief, Co-Editor, Advisory Board, Associate Editor and Editorial Review Board positions within the journals. We found that, while there has been improvement since 2017, nonetheless in 2020 over two-thirds of the editorial board positions within leading journals in the marketing academy are held by men.
At the same time our research highlighted how journal celebrations also favour men. Special issues for example include reflections from previous editors (who are mostly men), and invited commentaries (who are mostly men). And, where journals and/or their related associations celebrate outstanding research through awards processes, those awards which are named after leading figures in the field are all named after men! We are not arguing that women are deliberately excluded from celebrations, but that there are structural, systemic and institutional biases at play, which means male colleagues are privileged over women. And this of course, also means that injustice and inequality for female academics are perpetuated.
Addressing the problem
How then can the marketing academy and the publishing houses which publish our research help rectify this sad state of affairs? First of all, we can all ask our journal editors and gatekeepers in the Academy to act now. Specifically, we are asking journal editors and publishing houses to review their activities, and we offer here 4 simple steps to tackle gender discrimination specifically, and inclusion and diversity more broadly, in the marketing academy:
Build diversity into existing journal review boards which extends across the globe. Cry out for each Editor-in-Chief to publish a statement for their journal making clear ‘why’ its gender and race composition is the way it is. Ask that they embrace the principles of unity & diversity. Editors-In-Chief are well positioned to lead the charge moving forward.
Introduce a quota system to ensure diversity of people involved in journals from advisory boards, manuscript review boards, Associate Editors, Co-editors, to the Editors-In-Chief.
We should ask awkward questions of the leaders in our field. Why do the majority of named awards in our field honour white men? We request awards which also honour the leading people of colour and females in our field. Quite simply the current status quo is an injustice – not everyone is a white male academic, so why do they dominate everything!?
Celebrations – Our Editors-in-Chief can shape the field by celebrating those who remain invisible within our field. We have female role models for younger scholars to inspire them to greatness, but they are not celebrated or included either in editorial boards or in special issue celebrations to the same extent as men. Let’s rectify this.
Can we please bring the marketing academy up to speed in the year 2021? Let’s not procrastinate here or leave it to DC or Marvel fantasy movies to inspire change, let’s do it ourselves.
We know Rome wasn’t built in a day and change takes time, but we’ve heard all the clichés before – we are fed up, we are here, and we want to be listened to. Our marketing academy should reflect the values we cherish and those we wish our students to emulate. For too long the marketing academy has favoured one gender (and one race) and as a result, women have been pushed to the periphery of the wider academy.
Change, not tokenism
What’s more we want fundamental change, not tokenism.
We need an intersectional approach now more than ever; this recognises issues of race and gender, alongside other examples of subordination such as appearance, class, religion, sexuality and ability which are not independent of each other.
We need what Marian Wright Edelman (founder of the Children’s Defense Fund and civil rights activist) calls a global sense of connection – where everyone can be seen, and all voices are heard and rewarded, whether by being invited to contribute to special issues celebrating our journals or by membership of our editorial boards! We deserve ‘marketing joy’ to underscore what we have in common with others in a multiracial, multicultural, democratic society.
This is important, not only in providing role models for aspiring academics who are not solely “pale, male and stale”, as well as providing equal opportunities in terms of key indicators of esteem within our academy, but also in terms of harnessing what gets published in our journals. In 2021 it is simply not acceptable that 88% of advisory board members within our journals are men or that some journals in our field have never had a female Editor-in-Chief. When publishing houses claim on their websites to be fully committed to inclusion and diversity in their journals, we also need this to shine through within our journals. In the marketing academy, while there has been improvement in recent years, gender representation is still appalling.
We call on those who can to change this. We need parity. Now.
References
[i] Journal of Consumer Psychology, Journal of Consumer Research, Journal of Marketing, Journal of Marketing Research, Marketing Science, Journal of the Academy of Marketing Science, Journal of Retailing, International Journal of Research in Marketing, European Journal of Marketing, Industrial Marketing Management, International Marketing Review, Journal of Advertising, Journal of Advertising Research, Journal of Interactive Marketing, Journal of International Marketing, Journal of Public Policy and Marketing, Marketing Letters, Marketing Theory, Psychology and Marketing, Quantitative Marketing and Economics.
About the Authors
Andrea Prothero is Professor of Business and Society at University College Dublin, Ireland, and Co- Director of the UCD Centre for Business and Society (CeBaS). Her research broadly explores the area of Marketing in Society with a key focus on sustainability and gender issues.
Pierre McDonagh is Professor of Critical Marketing & Society at the School of Management, University of Bath, UK. Pierre has researched sustainable consumption & production since the early 1990’s and helps people understand what sustainable communication entails. He also writes about issues in gender equality in marketing and the benefits and challenges of critical marketing communications. He recently co-authored ‘The Dark Side of Marketing Communications’ with Tim Hill, which features as part of the Routledge series on Studies in Critical Marketing.
Most years, International Women’s Day is greeted by articles highlighting both progress made towards gender equality, and the distance still to close. 2021 is different. This year, organizations from the European Parliament to UN Women have instead drawn attention to how women have been pushed backwards – economically and politically – during the coronavirus. It has been “a disaster for feminism,”and a “great amplifier” which has exacerbated existing inequalities and unraveled tenuous gains. What does the research show?
First, the global economic contraction of the past year has disproportionately harmed women. In the United States alone, more than 2 million women have dropped out of the labor force altogether, a regression to 1988 participation levels, erasing a generation of gains.
Globally, women account for 54% of jobs lost during the pandemic, even though they make up only 39% of the global formal workforce.
Women bore the brunt of job losses in 17 of the 24 member-states of the OECD in 2020, and in South Africa, a survey found that two-thirds of workers laid off or furloughed in the first wave of the pandemic were women.
In part, this is a reflection of the sectors women work in, such as travel, tourism, restaurants, and food production, which have been largely shut down over the past year.
Women are also more likely to be employed on precarious or zero-hours contracts within these sectors, which made them vulnerable to job cuts, or in informal roles which left them outside the reach of government income-support schemes.
Finally, 190 million women work in global supply chains, including garments and food processing, and these industries have contracted as buyers either withdrew orders from suppliers during the recession, or sought to re-shore production closer to home. Labor market dynamics also mean women who stayed in work are among the most exposed to contracting the virus itself. A majority – estimates range from 67 to 76 percent – of the global health care workforce are women.
Yet only one quarter of the gendered discrepancy in job losses can be explained by the sectors where women are employed. Far more significant is the burden of care labor, both paid and unpaid, which disproportionately falls on women in both developed and developing countries.
Working mothers in the United Kingdom, for example, are 50% more likely than fathers to have either lost their jobs or quit in order to accommodate the responsibilities of caring for children with schools closed, with European women doing on average twice as much care labor as men during this period.
Over a million women in Japan left the job market in the first wave of the pandemic due to childcare needs at home, erasing tenuous progress the country had made towards workplace gender equality in the last decade. This unequal weight of the pandemic builds on pre-existing inequalities, as women are lower earners in many societies, meaning their jobs are considered a lower priority – by both employers and households – in times of crisis.
This economic crisis is not just a blow to women’s economic position, but to their political freedom. The “Local Diaries” podcast in India recounts the stories of women whose personal, political and sexual freedoms have evaporated as they have been locked down at home. As in pandemics past, covid-19 has seen a significant spike in domestic violence, femicide and other gender-bases violence in countries under lockdown. These include including developing countries like Nigeria, Argentina, Brazil, India, Pakistan, and China, and developed countries including the United States, the United Kingdom, France, Ireland, Lithuania, Sweden and Italy, a reminder that the home is not a safe place for many women. UN Women has referred to these spikes in violence as the “shadow pandemic.”
Moreover, despite early warnings from international organizations and women’s rights advocates, many countries shut down or diverted resources away from reproductive health care during the pandemic, leading to a rise in maternal deaths, unsafe abortions and pregnancy-related deaths. Finally, lockdowns themselves – and the expansion of policing and military powers associated with their enforcement – can themselves pose a risk to women, as police forces can themselves be significant perpetrators of violence against women, and as governments take advantage of these powers to suppress political organizing, including feminist organizing, as seen recently in both the UK and Poland.
At the same time, in a punishing political environment, women and feminist organizations have been at the forefront of pandemic response. The Chilean feminist movement has released a useful guide for governments and employers for responding to the pandemic in a gender-just way, while the Indian Kudumbashree women’s collective organized grassroots community kitchens and takeaway restaurants to provide food and employment to women, especially migrant women, during the country’s shut down, and repurposed textile micro-enterprises, largely women-owned, for the manufacture of PPE.
Despite calls from international experts for governments to respond directly to the crisis facing women by keeping services for reproductive health or shelters for victims of gender-based violence open, targeting cash transfers to women in informal employment and providing for paid child care, UNDP reports that only 12% of governments have adopted adequate gender-sensitive measures in their pandemic response.
Meanwhile, employers who have disproportionately laid off women in the crisis now report that gender equity will take a backseat to restoring their financial sustainability as the pandemic ends. This is made more difficult by the fact that some governments, such as the UK, have suspended requirements for companies to report on their gender pay gap or comply with other equality requirements, as part of pandemic support.
In our own research on corporate responses to covid-19, we found brands advertising luxury fashion goods to women and presenting the pandemic lockdowns as a welcome relief from labor in which women could enjoy them, a regressive image that shows how women’s work is still seen as frivolous and extraneous.
This International Women’s Day, then, we must reflect not on what progress we have made or can make, but on how women, internationally, can recover what we have lost.
About the Author
Maha Rafi Atal is a postdoctoral research fellow at the Copenhagen Business School, where her research focuses on corporate power, corporate social responsibility and corporate influence in the media. She is a co- Investigator on the Commodifying Compassion research project. http://www.maha-rafi-atal.com
How can financial investors better understand underlying risks and act accordingly
By Amanda Wildhaber, Dominik Wingeier, Jessica Brügger, Nico Meier, and Dr. Kristjan Jespersen
◦ 4 min read ◦
Forests play a crucial role in tackling climate change and protecting biodiversity. Around 12 million hectares of tropical forest worldwide were lost in 2018 and approximately 17% of the loss stem from the Amazon alone. The main drivers of deforestations are soy, palm oil, cattle and timber production. As deforestation may harm a company’s reputation, directly affect its supply chains and increase regulatory risks, many institutional investors are concerned about the impact deforestation can have on their portfolio companies.
How can deforestation be measured?
The definition of deforestation risk from an investor’s perspective is difficult to lock-in because different frameworks and approaches focus on different aspects of the risks. The amount of information and the lack of transparency can be overwhelming to financial investors. Therefore, a helpful framework for financial institutions to systematically evaluate the deforestation risk management of portfolio companies has been developed. The framework is divided into two parts, an internal assessment of a company’s commitments and achievements regarding deforestation and an external assessment of outside policies related to deforestation, namely binding laws and private sector initiatives. The framework may serve to complete a scorecard which gives an overview of how well prepared a specific portfolio company is and if it is able to deal with deforestation risks and future regulatory changes. The final scorecard reflects the deforestation risk of financial institution’s portfolio companies.
Is voluntary support sufficient?
Many companies voluntarily support sustainability initiatives and follow zero deforestation commitments (ZDCs) to signal their intention to reduce deforestation associated with the commodities in their supply chain. The reasons behind their commitments include demonstrating corporate social responsibility (CSR), reducing the risk of potential reputational harm and supply chain disruptions. To understand the value of these commitments in mitigating deforestation and associated risks, it is important to critically analyse them in terms of their scope, effectiveness, monitoring and achievements. This includes for example, assessing how companies define deforestation and whether they systematically measure the compliance with their commitments.
External pressure to facilitate internal commitments
It is valuable to see companies implementing robust internal policies and commitments to manage and monitor their deforestation risk. However, it is also important to have external policies in place to hold companies accountable. There are two types of external policies the proposed framework is based on.
The first type are binding laws which apply for portfolio companies and thus represent a regulatory risk. The EU Timber Regulation (EUTR) of 2010, which prohibits the sale of illegally logged wood in the EU, is one example for such a binding law.
The second type are initiatives by third parties, which are of a non-binding nature and complement the binding law. One such initiative is the Roundtable for Sustainable Palm Oil (RSPO), which is an initiative by private companies as well as external parties targeted to eliminate unsustainable palm oil production.
How do the companies score?
Based on the assessment of the two pillars of the framework – internal and external – a scorecard is derived which assists investors to better understand how a portfolio company or a new potential investment is managing its deforestation risk. Answering questions with scores from 1 to 3, whereby 1 is the best score and 3 the worst, the proposed scorecard allows the quantification of the deforestation risk management of a company. While the distinction between 1, 2 or 3 is not always straightforward, the final score gives a tangible assessment of how well a company is positioned to manage its deforestation risks and associated future regulatory changes. The following scorecard provides an overview of the assessment and indicates how well Nestlé is managing deforestation risks.
Having such a scorecard allows investors to manage and mitigate the deforestation risks they face in their portfolios. In addition, the final scorecard enables investment analysts to directly compare potential investments with other companies and can be used as a parameter in the investment process.
The call for action is getting louder
New regulatory requirements, growing public scrutiny and extended private sector initiatives (such as the investor-led initiative Climate Action 100+), mean that it is becoming increasingly important to properly manage deforestation risks. This is also becoming a key concern for financial investors and it is time to think about systematic approaches on how to include deforestation into the investment process. The proposed framework is intended to serve as a starting point for just that. It allows a quantification of deforestation risk and the identification of critical factors. Building the basis upon which investors can engage with companies. This is a first step to support the mitigating of not only financial but also ecological risks.
About the Authors
Amanda Wildhaber is completing her masters in Economics at the University of St. Gallen. She works as a Junior Consultant in the Strategy team of Implement Consulting. Her interest in ESG and sustainable investments developed when she wrote her bachelor thesis on social enterprises in India.
Dominik Wingeier is studying master’s in Banking and Finance at University of St. Gallen. Dominik has been working for BlackRock where he was responsible for executing and monitoring primary, secondary and direct investments in infrastructure projects.
Jessica Brügger is studying master’s in Business Innovation at the University of St. Gallen. Jessica is currently a board member of the Private Equity & Venture Capital Club of the University of St. Gallen and is particularly interested in making the financial industry more attractive to women.
Nico Meier is studying master’s in Accounting an Finance at the University of St. Gallen. Nico has been working at BLR&Partners where he is responsible for private equity investments. Additionally, he has experience providing M&A, ECM and DCM services.
Kristjan Jespersen is an Associate Professor at the Copenhagen Business School. He studies on 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.
Notwithstanding promises of win-wins and synergies, we have good reasons to question whether companies address social problems in society’s best interests. As many critics have pointed out, companies tend to promote solutions that foster their commercial interests – often without considering their broader social impact.
Do our suspicions stop them? Of course not. Companies are usually well aware of any concerns and continuously evaluate the risk of prompting a controversy around their social activities. When they don’t have the social license to operate, they simply cultivate relations with organizations that do and get them to act on their behalf. Using such relational strategies, companies’ efforts remain hidden from public scrutiny insofar as they operate under the radar. Smart!
It’s not quite that simple, however. Legitimate organizations such as NGOs are just as aware of those widespread suspicions, and they are therefore often reluctant to work with companies. Indeed, if an organization’s relations with companies are perceived to be inappropriate, the organization risks exacerbating concerns around corporate influence and may thereby jeopardize its legitimacy too. The widespread suspicions of companies’ intentions thus make it more difficult for companies to participate in social change. Let’s call this a legitimacy barrier.
Overcoming the legitimacy barrier through relational work
How do companies overcome the legitimacy barrier and become legitimate actors in social change? In a recent publication (Girschik, 2020), I theorize how companies may engage in relational work to cultivate and shape their relations with legitimate organizations in such ways that redefine their involvement as socially responsible and thus legitimate. The paper details that companies can take four interdependent steps:
Cultivating communal relations: As a first step, companies can form or strengthen personal relations with people who work for legitimate organizations and who are likely to be interested in addressing the social problem in question. On a personal rather than organizational level, it is easier to align and create a shared understanding of potential courses of action.
Extending organizational support: Once a shared understanding is evolving, the company can start diligently targeting resources that enable the other organization to boost its activities and address the social problem. Such support has to happen on the organizational level to make sure that it is not considered for individual gain.
Articulating a partnership: Because the second step produces salient practical outcomes and illustrates the benefits of corporate involvement, it opens a window of opportunity to formalize collaboration through a partnership agreement. As part of this agreement, the company can participate in defining not only further courses of action but also the company’s role.
Differentiating as a socially responsible company: At this point, the company’s competitors have likely become interested and may try to imitate the company’s involvement by forming partnerships with the same or similar legitimate organizations. That’s a good thing for the first-moving company because it promotes the legitimacy of such partnerships. And benefiting from its strong relational embedding, the company is likely to outperform competitors through superior compliance with expectations. Being perceived as less sincere, competitors’ efforts are thus less strategically valuable and the first-moving company stands out as most socially responsible.
This process is time- and resource-consuming, but my study shows that it may pay off: it may enable companies to legitimate their involvement in social change while securing a competitive edge.
For better or worse?
These four steps explicate subtle yet consequential efforts through which companies may shape social change. The good news is that it is not easy and takes genuine long-term commitment. The bad news is that companies’ commercial interests may inform and mold trajectories of social change while their actual influence is hidden under a CSR veil. We need to keep deconstructing the relational constellations through which companies establish and exert their influence.
Verena Girschik is Assistant Professor of CSR, Communication, and Organization at Copenhagen Business School (Denmark). She adopts a communicative institutionalist perspective to understand how companies negotiate their roles and responsibilities, how they perform them, and with what consequences. Empirically, she is interested in activism in and around multinational companies and in business–humanitarian collaboration. Her research has been published in the Journal of Management Studies, Human Relations, Business & Society, and Critical Perspectives on International Business. She’s on Twitter: @verenacph
The Sustainable Development Goals (SDGs) are the common goals of global development as we all agreed. Since its endorsement in 2015, it has become the norm. Multilateral corporations, aid agencies, development finance institutions and international organizations all refer to one or two Sustainable Development Goals (as their priorities) to legitimize environmental and social impact of their business activities. (I must confess here that I was also one of them). However, what are the actual changes in practices? Does it merely work as one other additional reference to our work? Otherwise, does it provoke transformational changes in our business strategies and practices for sustainability? Ironically, the Sustainable Development Goals are at once too sophisticated and too vague to do so.
The complexity of the goal structure should not be an excuse.
The development process of SDGs has been grounded based on lessons learnt from the Millennium Development Goals. Because the MDGs excessively focus on the social aspect of development, the SDGs embrace economic, social, and environmental aspects. This led the number of goals to increase from 8 to 17. In relation to the goals, 169 target goals and 231 indicators have been developed to track the progress of 17 goals (In comparison, the MDGs only have 21 target goals and 60 indicators). These vast numbers intend to strengthen progress monitoring and enhance result management; however, such complexity seems problematic to fulfil the initial purpose. Some indicator selection processes are still under the technical review process after five years of SDGs have once passed and almost half of the indicators (106 out of 231) contain technical difficulties producing data on a regular basis to track the progress. I know that measuring the fulfillment of the whole massive SDGs is complex and may not be an easy task. However, when it comes to wrestling with such a giant, the sophisticated skill set (here, seeking clear target goals and indicators) would be a winning strategy rather than hurdles. Thus, how should we deal with the giant?
We have to consider which specific target goals and indicators are aligned with my actions if you have a will to achieve the SDGs. Simply stating one of the goals does not track your achievement. Each goal cannot be even drawn in parallel rather they are all interlinked.
Universality matters, but not everyone is in the same boat.
We know why the SDGs have a principle of “No one left behind” across all the goals. This principle is again a result of lessons from the MDGs, which were criticized for the fact that they did not consider inequality and vulnerable groups in a development process. So that, this core principle is embedded into seventeen goals with the terms “inclusive”, “for everyone”, “for all” regardless of the developmental stage of their nations. Then, how can we make sure this would go far beyond the rhetoric?
We need extreme caution here. Do we have enough knowledge on those who are left behind? To move forward beyond the rhetoric, we need to unpack the word ‘everyone’. Even though ‘universality’ is an essential principle, we have to find out ‘who is left behind’ in every different context to make them not left behind, rather than concealing those excluded people under the name of “for everyone”.
Let’s see microfinance. It was expected as a universal means to reduce poverty and inequality since it provides a way of financial inclusion to those previously excluded to access credit. However, many research findings demonstrate that a particular type of “financial inclusion” which is embedded into microfinance cannot solve the marginalized groups’ economic challenges by itself. Without complementary social support, it was not enough to empower the poor, and even sometimes it resulted in an exacerbating situation for the people. I think this tells us the importance of deeper understanding of the poor, thus the need for a carefully targeted approach for impact.
In brief, working for “everyone” requires additional attention and effort. Whose reality should count first? How could we guide us to hold clear accountability to turn the “No one behind” catchphrase into concrete actions? I believe one of the roles of research on the SGDs should be founded here.
SDGs as a norm: it should be embedded into everyone’s everyday life.
Unlike the age of the MDGs, the SDGs involve a variety of actors such as private sectors and civil societies, who were not officially a part of the MDG process. Various stakeholders can create synergy through cooperation, but the responsibility to fulfil the SDGs become vague. According to Jurkovich (2019), three essential elements are needed to become a norm: “a moral sense of “oughtness”; a defined actor “of a given identity”; a specific behaviour or action expected of that given actor”. The SDGs as a global norm neither identify relevant actors for each specific goal and indicator nor have a compliance mechanism.
Sadly, the SDGs do not assign the responsibilities to anybody and the technical difficulty to monitor them also implies oughtness can be weakened. Frankly speaking, we officially have no obligation to contribute to the SDGs.
Despite its non-obligatory identity, I strongly believe that most of us have a willingness to dedicate to the SDGs. Although we all understand its complexity of monitoring, ambiguity of target people and non-compliance mechanisms. I urge you as an individual, a scholar or a member of the whole global development community to carefully consider what goals/target goals/indicators and for whom I can contribute with a strong responsibility. Otherwise, the SDGs risk losing its political power and may be on track to decay its status as the norm before its completion in 2030.
About the Author
Suhyon Oh is a PhD fellow at the Department of Management, Society and Communication, Copenhagen Business School, and has over ten years of professional experience working with the donor agency, international organizations, development consultancy, NGOs as well as private sectors. As an international development expert, she has worked with the projects on development finance, financial inclusion and global value chain development, etc. Her current research interest is development finance institutions, impact investing funds in developing countries, hybrid organization strategy and strategy as practice.
Labor integration of migrants is a topic frequently on the public and political agendas, as it is increasingly seen as the first step to successful societal integration. Often the light is turned on the migrants and what they need to change and improve to get a job. They are expected to make themselves employable by learning the local language, by adapting to local ways of applying for jobs, and by adding local skills to their existing competencies. So, it seems, the moment migrants show some form of adaptation, they should do fine on the job market. But do they?
Why do organizations under-employ highly-skilled migrants?
Well, maybe there is more to it. Highly-skilled migrants are often underemployed. This means they get jobs below their qualification level. We have all heard of the medical doctor driving a taxi. But who asks ‘why does a taxi company hire a medical doctor as a driver’? In a recent study, we decided to turn the light on the employers, the hiring organizations, instead of the migrants. We searched for an answer to the question of why organizations under-employ highly-skilled migrants.
We followed a mentor program aiming to integrate highly-skilled migrants in the labor market through mentorship and internship. In this program, support was given to migrants to learn the rules of the Swedish employment game, how to write a strong CV, cover letters, the importance of networks, for example. In our interviews, we talked to both mentors and mentees (migrants). They told us about arguments used in organizations to explain (or shall we say justify?) the under-employment of highly-skilled migrants.
Alleged risk, but for whom?
They said that migrants are often described as lacking local job-seeking skills, how to write a CV, how to present oneself in the application letter, how to get in contact with a potential employer. At times, they may lack local language skills too. Yet, these skills were precisely what they acquired in the program (and in internships) and many of the migrants we interviewed possessed those skills, yet, remained unemployed. More interestingly, we got to hear that the highly-skilled migrants were also talked about in terms of bringing with them the unknown and the unfamiliar: unknown diplomas, unfamiliar job references, unfamiliar working cultures, and habits, for example. And, interestingly, in the interviews, this unknown was associated with a risk… but a risk of what? And, a risk for whom?
Keeping migrants in a lower symbolic position to maintain the power of ‘normality’.
Using the relational theory of risk, a theory where risk is seen as socially constructed, we realized two things. First, if people talked about risk, it was because they felt that something that they value was being threatened. We found that they valued their usual (habitual) ways of doing things, the organizational normality, more than the new skills and experiences the skilled migrants could bring to the organization.
Hence, highly-skilled migrants were perceived to be a risk to the valued organizational normality and kept away from employment, to avoid disruption of this normality.
Second, if employed, they were hired at a level that did not allow them to fully contribute to the organization, at a level that indicated: your skills are not valued here, they are not to be considered, they are not to transform our usual way of doing things.
These findings point to an organizational ground for the underemployment of migrants, independent from migrants’ skills and adaptation efforts. In simple terms, organizations may have an interest in under-employing migrants: they assure that their ‘normal’ way of working is not changed, that they are not challenged in their comfortable, everyday routines. The organization’s interest in under-employing migrants goes beyond having a (cheap) skilled workforce without recognizing its value, it is also to clearly indicate that ‘the way we do things around here is valued and we don’t want to question it’.
Who should be seen as a risk? The migrants or the organizations?
In a nutshell, we got to hear that migrants are presented by some as being a risk. But, frankly, a risk for whom? For those comfortably installed in their routines? How about we turn things around and consider that those organizations, not the migrants, should be seen as a risk.
Indeed, by stopping the integration of highly-skilled migrants, are those organizations not a risk to a sustainable society and the (labor) integration of the migrants we welcomed?
The good news is that often, this comfort of the ‘normality’ is not so difficult to change. Organizations’ routines are constantly in the making and it is actually beneficial to challenge and change them from time to time to continuously adapt to the organization’s changing environment. So, the next time you hear that it is ‘normal’ to expect a local degree for this position, ask yourself: who really benefit from this ‘normal’? And, who should be seen as a threat here?
Annette Risberg is a Professor of Diversity Management at Copenhagen Business School and Professor of Organization and Management at the Inland Norway University of Applied Sciences. Her research focus is on practices of diversity management in general and the inclusion of immigrants in organizations. Her latest co-edited book is The Routledge Companion toOrganizational Diversity ResearchMethods and Diversity in Organizations.
Laurence Romani is an Associate Professor at the Stockholm School of Economics. Her work focuses on representation and interaction with the cultural Other in respectful and enriching ways. She currently investigates the conditions of integration of the perceived cultural Others (e.g. ethnic minorities, migrants) in the Swedish labor market. She critically studies race, gender and class hierarchies in organizations’ work with cultural diversity.
Sustainable Visioning as a driver of Corporate Transformation
By Heather Louise Madsen
◦ 4 min read ◦
CO2 reduction is a hot topic for almost every company today. Here the focus is not just on the CO2 generated by the company itself, but also on the carbon emitted along its value chain. The problem is that changing processes, or even products and services, to make them more environmentally friendly can be a daunting and costly task. This can leave CEOs and other top managers wondering what the real cost and impact of CO2 reduction is, where to start, and whether it is even possible to create a prosperous business without generating pollution.
In answer to many of these tough questions, an increasing number of companies are succeeding in reducing carbon and completely transforming their businesses into sustainable and profitable powerhouses, using a combination of strategic vision and sustainability orientation.
A new CEO for a Company Topping the Sustainability Ranking Charts
January 1st, 2021 was Mads Nipper’s first day as CEO of the Sustainable Energy Giant Ørsted. And before the end of his first month in this new position, Ørsted ranked the most sustainable energy company for the third year in a row, and the second most sustainable company in the world after Schneider Electric. This raises the question, what is Nipper’s position on sustainability, and are these views important for his role as CEO of Ørsted?
In 2016, as the then CEO of Grundfos, Mads Nipper gave a presentation for the Global Compact Leaders Summit in New York where he stated: “I represent an SDG 6 and 13 company, who also happens to be the biggest water pump company in the world.” The UN Sustainable Development Goals (SDGs), representing a global platform and common language for addressing 17 core sustainability issues and their impact, also figure prominently in Ørsted’s corporate language. From Annual Reports to investor letters, Ørsted identifies SDG 7 (energy) and SDG 13 (climate action) as their primary impact areas. This indicates that there may be some very fundamental alignment between Nipper’s visionary statement and the mindset of his predecessors at Ørsted.
What led Ørsted to up-end their core business and undertake a sustainable transformation?
In 2001, Ørsted (then DONG Energy) hired CEO Anders Eldrup, just as Denmark was going through a liberalization of the electricity and gas sectors, which was putting extreme financial pressure on the company. Eldrup was the former Danish Secretary of State, and as such had extensive experience with both financial and political mechanisms. Seeing an opportunity to take advantage of an emerging political demand for climate action and policies to accelerate the development of offshore wind, Eldrup began increasingly to focus innovation resources on offshore wind and renewable energy, while the primary business of the company remained oil and gas. As renewable energy subsidy schemes increased in Denmark and the EU in the years that followed, Eldrup formulated a new company strategy that was released in 2009 called 85/15: “to transform our company from a situation of 15% renewable energy and 85% of fossil-fuel based energy to the opposite”. Jakob Askou Bøss, Head of Strategy and Communication at Ørsted, identified the strategic analysis of CEO Anders Eldrup as “The driving force behind formulating the new vision of the company,“ referring to the 85/15 objectives.
Despite the sacrifices that would need to be made as the core competencies of the company would have to be completely re-designed and transformed to focus on not-yet price competitive technology, the decision had been made. And this strategy was then further anchored to sustainability with Ørsted’s vision: “creating a world that runs entirely on green energy”. This vision made explicit the desire to reach outside of the organization with their “green” aspirations, connecting not only to ideals of wealth and prosperity, but also to planetary concerns.
These ‘green aspirations’ were then followed up by Eldrup’s successor Henrik Poulsen, who became Ørsted’s CEO in 2012. As stated by Poulsen:
“In the world of energy, the fundamental challenge we face is to transform our energy systems so that more and more of the energy we generate comes from renewable sources such as wind power, biomass and solar energy.”
Poulsen then backed these aspirations by setting very specific targets for the company including “quadrupling our offshore wind capacity, from 1.7 GW in 2012 to 6.5 GW in 2020“. By 2017 Ørsted had completely divested all upstream oil and gas. This was also the year that newly built offshore wind became cheaper than black energy for the first time in history. By the time Ørsted reached 2020, the company was ranked number 1 of more than 7500 international, billion-dollar companies in the Corporate Knights’ 2020 index of the Global 100 Most Sustainable Corporations in the World, making Ørsted the most sustainable energy company in the Global 100 index. As demonstrated by Ørsted, strategic vision and sustainability orientation were used as drivers for innovation, transformation and growing the company’s sustainable business and investment portfolio. But how can Ørsted’s story help other businesses? The answer lies in sustainable visioning.
How can sustainable visioning help businesses onto a path of prosperity AND sustainability?
Sustainable Visioning is a new term defining the management process of combining a strong strategic vision with the acknowledgement of the necessity of committing more profoundly to people, planet and prosperity concerns.
Madsen & Ulhøi, 2021
The following are guiding principals of sustainable visioning that Ørsted can be seen as applying, and which may be able to help other companies onto a similar path. First, in order for businesses to achieve sustainable visioning, they need to practice proactive, extroverted and visionary, rather than introverted approaches to sustainability. When working on sustainable innovations, it can also be wise to engage the Tripple Helix model including industry, universities and government working together. Innovation can also be usefully extended beyond products and services, to include business model innovation. This can help to navigate to a desirable sustainable future through direct planning, decisions, actions and behavior in all aspects of the business. And finally, taking a clear long-term orientation is also seen as important for sustainable visioning to be successful.
In practice, following these key guiding principals of sustainable visioning may make it more likely to effectively link strategic visioning to long-term sustainability objectives, providing the necessary support for corporate growth and innovation needed to ensure a successful transformation.
Heather Louise Madsen, Ph.D. is the PRME Strategy Manager at Copenhagen Business School, and has over ten years of professional experience working with sustainability. As a sustainability expert, she has worked with the organizational implementation of the UN SDGs in the private sector, and has extensive experience working with CSR, the UN Global Compact, carbon footprint reporting and social, environmental and economic sustainability. Heather is dedicated to topics of innovation, strategy, business transformation, organizational learning, business model innovation, renewable energy and sustainability.
The garment and textile industries account for around 10% of global CO2 emissions, and their fast fashion approach consumes huge amounts of water in production and processing stages. While the fast fashion model incentivizes the overproduction/consumption of clothes, more sustainable solutions lie in the configuration of value chains towards slow fashion (durable products produced on demand) and the introduction of circular business models. Such a transformation will have consequences for the environment, workers’ conditions, and economic development.
This is particularly the case in the light of COVID-19, which led to a temporary disruption in the global garment and textiles value chains as stores closed in Europe and the United States in the spring of 2020. The cancellation and non-payment of garment orders particularly affected suppliers and workers in Bangladesh, leaving hundreds of thousands of workers without jobs and possibly facing destitution.
This is the focus of a new research and capacity-building project on ‘Climate Change and Global Value Chains’ coordinated by the CBS that has recently been funded by the Danish Development Research Council. In this research project, we will be working with colleagues from the University of Aalborg and Roskilde University in Denmark as well as BRAC University and the University of Dhaka in Bangladesh. Private sector partners include the Danish Ethical Trading Initiative and Danish Fashion and Textile.
I think that a key challenge in this new project is how we approach ‘climate change’ in the context of global value chains.
In the Danish debate on climate change, it is almost universally accepted that climate change should be at the top of the political and corporate sustainability agendas. However, both employers and workers in the Bangladeshi garment and textile industries may not perceive climate change mitigation as an immediate priority.
First, the purchasing practices of major brands sourcing garments from Bangladesh tend to result in downward price pressures, seasonal fluctuations in demand, and shorter lead times while, at the same time, these brands are also imposing ever greater environmental and labor standard requirements on their suppliers (not only in Bangladesh but elsewhere in the global South). Economic value is very unevenly distributed along the textile/garment value chain, with major brands reaping up to ten times higher economic value than suppliers – and even less reaching workers.
Hence, Bangladeshi suppliers often perceive the environmental and labor requirements of brands as adding to their costs without bringing additional business benefits.
In this context, suppliers may have very few, if any, incentives to address climate concerns in their value chains, while workers in the industry are trying to survive in a context of economic uncertainty.
In my view, a critical aspect of this new project is therefore that we will not only look at climate change from a Northern-centered perspective; that is, we are not only concerned with how brands and factories engage in the process of decarbonization. We will also zoom in on the importance of climate change adaptation, which I would label a more Southern-centered perspective on climate change in global value chains.
In fact, Bangladesh is one of the countries most affected by global climate change whose coastal areas and ports are prone to flooding, resulting in disruptions of the garment/textile value chain and economic losses for local manufacturers and workers.
Moreover, garment factories in greater Dhaka have extremely high lead and CO2 emissions, while many factory workers live in parts of the city that have unhygienic water supplies and must cope with living conditions that affect their health. Hence, integrating climate change and global value chain analysis from a Southern-centered perspective, I would argue, involves looking at the ‘business case’ for climate change adaptation – in other words, we must understand how can climate change adaptation can help in securing the future viability, competitiveness, and jobs in the garment industry and textile industries of Bangladesh.
About the Author
Peter Lund-Thomsen is Professor at the Department of Management, Society and Communication at Copenhagen Business School. His research focuses on sustainable value chains, industrial clusters, and corporate social responsibility with a regional focus on South Asia.
As Bowie almost made a prediction when he sang in his lyrics from 1981: ‘It’s the terror of knowing what this world is about/Watching some good friends screaming “Let me out!”/’, 2020 proved to be a year of challenges, which however took us to higher grounds of learning and collaboration in many unexpected ways.
The sudden changes and lockdowns across the world led by Covid-19 sparked many initiatives and innovation in various fields. As presented in a previous blog post, it created opportunities for urban spaces to be rethought, experimenting with expanding and further developing various mobility formats.
Beyond urban spaces, the pandemic also became a fuel to push initiatives in other fronts, such as social and local manufacturing.
Makerspaces and local production initiatives were well described in a recent blog post by my colleague Efthymios Altsitsiadis. During the pandemic, makerspaces became more than a niche, through shared content and distributed leadership, these spaces became relevant production resources. Makers collaborated and engaged in locally producing personal protective equipment (PPE), helping cities and countries better cope with the shortages and international supply chain issues during the first lockdown.
CBS has followed this process closely as it is currently a partner in the EU-funded iPRODUCE project. The project started in January 2020 focusing on developing a novel social manufacturing platform that embraces manufacturing companies in the consumer goods sector. In short, the project is committed to bringing closer manufacturers, makers and consumer communities (MMCs) at the local level; to engage them into joint co-creation challenges for the manufacturing of new consumer products and the introduction of novel engineering and production (eco)systems; to fuse practices, methods and tools that both makers and manufacturing companies (SMEs specifically) are employing.
The project, as an innovation action (IA), has formed clusters in six locations, Denmark, France, Germany, Greece, Italy and Spain composed of Fablabs, makerspaces and research institutions. These clusters are defined as Collaborative Manufacturing Demonstration Facilities (cMDFs). In Denmark, CBS is the research institution working closely together with betaFACTORY forming the DK-cMDF.
In the context of this project, social manufacturing can be described as a primary ground to democratise innovation.
The ‘Do it yourself’ (DIY) movement, assisted by makerspaces and fablabs, offers opportunities for real exchange towards solutions to inform the development of many products through an open platform, to not only support, but also to expand these processes and broaden their reach across society.
During the onset of the pandemic, when the project was only in its third month, while project activities required adjustments and re-planning, the fablabs and makerspaces in the distinct locations became important resources for local manufacturing facilities, closing a gap of problems related to international supply chain production and distribution regarding protective medical gear.
The open source community’s umbrella became a key local asset in bridging various groups and bringing makers together towards one goal – manufacturing products that would help save lives.
Spain, which was hit hard by the pandemic early on, spearheaded this movement in Europe. Already in March 2020, DIY groups organised themselves online (primarily WhatsApp and Telegram), sharing questions and designs through these social media platforms. Doctors and other types of stakeholders also joined some of these groups, providing expert information. They shared requests, talked together and developed designs and models, which were then 3D printed widely across in various makerspaces, sparking a local production and distribution supply chain. The distribution, which was initially done by volunteers, was carried out by taxi drivers and local police in an extraordinary mode of collaboration during the most extreme lockdown phases. By June 2020, over one million face shields had been produced and distributed across Spain [1].
The Spanish face shield design, under the creative commons licence, was picked up by makers everywhere, including in Denmark, where the Facebook group ‘DK Makers mod Corona’ (DK Makers against Corona) was quick to adapt the design to specific Danish regulations and started locally producing the face shields during the first Danish lockdown. Over 63000 face shields were produced and distributed across the country by July 2020 and the Facebook group grew from 50 to over 2500 members during the same period.
In both cases, what stands out is the fact that the expertise, manufacturing capability and human resources are without doubt available everywhere and when a common and purposeful goal is set, fast and impactful results can be achieved.
These civic responses also bring forward questions on how society could make better use of these valuable resources for other distinct local challenges, and how we can positively disrupt mass global manufacturing towards distributed local manufacturing. As the pandemic initiatives have shown, by reorganising and setting common goals, makers and industry can bridge gaps, creating wider societal benefit that challenge the status quo and push new manufacturing opportunities that can define ‘new normals’ also for local production – taking all of it to higher and more sustainable levels in the 21st century.
iPRODUCE – “A Social Manufacturing Framework for Streamlined Multi- stakeholder Open Innovation Missions in Consumer Goods Sectors” (2020-2022) has received funding from the European Union’s Horizon 2020 research and innovation programme under Grant Agreement no. 870037. This publication reflects only the author’s view and the Commission is not responsible for any use that may be made of the information it contains.
Isabel Fróes is a postdoc at MSC Department at Copenhagen Business School working in three EU projects (Cities-4-People, iPRODUCE and BECOOP). Isabel also has wide industry experience and has worked both as a user researcher and service design consultant for various companies in Denmark and internationally. For more detail please see her Linkedin profile.
By Isaac Caiger-Smith, Izabela Delabre and Kristjan Jespersen
In recent years, companies dealing in global commodities – such as palm oil, soy and timber – have faced increasing criticism for failing to meet zero deforestation targets in their supply chains. In response to these concerns, the use of innovative technological solutions, such as satellite monitoring systems to monitor deforestation in supply chains, are becoming increasingly commonplace.
Companies such as Global Forest Watch, Satelligence and MapHubs provide such platforms, though many large companies also choose to create their own monitoring systems in-house. It is in the palm oil sector that adoption of satellite monitoring has (so far) been most widespread. The palm oil sector is commonly characterised as being ‘hourglass’ in shape, with hundreds of thousands of growers/producers, mostly in Indonesia and Malaysia, being connected to hundreds of thousands of end users all around the world by a handful of powerful traders and refiners. Previously, single companies aiming to monitor their supply chains for deforestation risk would thus be faced with the impossible task of keeping track of (potentially) thousands of suppliers simultaneously.
In principle, satellite technology platforms signify a ground-breaking shift in possibilities for those concerned with monitoring deforestation risk.
By making it possible to map out suppliers’ concessions and monitor in ‘near real-time’ for deforestation events, consumer goods manufacturers and palm oil traders are able to cheaply and accurately ensure suppliers’ compliance with their commitments to zero deforestation, punishing non-compliant suppliers, encouraging and incentivising good environmental practice (Global Forest Watch, 2020). The clear promise such technology brings has led to their rapid uptake by the majority of the world’s largest palm oil traders and refiners, as well as many influential consumer goods manufacturers and non-governmental organisations. The hope of companies and non-governmental organisations is that such technological initiatives will play an important role in supporting zero deforestation efforts. As such, many of these actors are investing significant capital to increase their monitoring capabilities, and are highly vocal about doing so, speaking of the positive environmental impacts they claim will flow from their use.
Through a series of in-depth interviews, it quickly became clear that despite the far-reaching functions these actors claim satellite monitoring can serve, its impact on the palm oil sector thus far has been far more limited in scope (both in terms of impact on supply chain relations and environmental outcomes) than the PR teams of the world’s palm oil giants seem to suggest.
Despite some positive developments in the realm of certified palm oil, the widespread adoption of satellite monitoring schemes across the palm oil sector has thus far failed to significantly reduce the rates of tropical deforestation associated with the industry.
Lyons-White and Knight, 2018.
Although satellites provide timely data on exactly where and when deforestation is occurring, traders and refiners have thus far been largely unable to use the data to influence the behaviour of offending firms. There are numerous reasons why this is the case.
Decontextualised data
Knowing where deforestation is occurring does not necessarily tell you who is responsible. In many instances, palm oil traders simply do not know who their third-tier suppliers are – if the alerts provided by remote sensing data cannot be combined with full knowledge of a firm’s supply chain (‘traceability to plantation’), they will often be unable to act on them. Achieving 100% traceability to plantation is a task all of the major traders are currently engaged in, yet it is a long and difficult process – as previously mentioned, the structure of the palm oil sector is complex, with numerous tiers of suppliers separating those engaging in monitoring from those being monitored.
In addition, the difficulty of the task is further exacerbated by inaccurate data on land ownership, competing claims, and unofficial occupation. Until these systemic issues are addressed, the situation regarding monitoring will remain much as it is today – satellite monitoring systems will continue to provide accurate alerts, but in the vast majority of cases (approximately 90%, according to interviewee from palm oil trader) traders will be unable to attribute it with certainty to actors from their supply chain, and thus will not be able to meaningfully respond.
Leverage issues
In instances where technology users are able attribute a deforestation alert to an actor from within their supply chain, firms often lack the leverage to change suppliers’ behaviour and ensure compliance with their sustainability standards. Buyers have two options: negotiate with producers or blacklist them.
Given that buyers are unwilling to pay a premium for deforestation-free products (Delabre et al, 2020), providing incentives for non-compliant suppliers to stop harmful behaviours is challenging – expecting growers to bear all the costs associated with non-expansion without any reward is not a sustainable system. Furthermore, the threat of being blacklisted from a company’s supply base is also unlikely to have the desired impact; suppliers will likely have no trouble finding other buyers, in markets where sustainability credentials are generally seen as less of a priority (Schleifer & Sun, 2018).
In this context, it is clear that thus far, satellite monitoring has not been capable of producing the far-reaching effects, which may have been desired.
Despite this, satellite monitoring has certainly contributed to several interesting developments in the palm oil sector. For example, interviewees emphasised the positive impacts of environmental non-governmental organisations armed with satellite monitoring technologies, acting as unofficial but powerful ‘watchdogs’, ‘naming and shaming’ consumer brands and traders associated with deforestation events.
It seems the ever-present risk of exposure (and subsequent brand damage) posed by non-governmental organisations’ use of satellite monitoring is a significant driver of new norms and practices within the industry.
These norms emphasise that it is necessary for powerful actors, such as traders and consumer goods manufacturers to be proactive in effectively addressing deforestation, both within and outside their supply chains. Interviewees also emphasised increasing levels of dialogue/cooperation across actor types, through for example, the creation of focus groups made up of producers, traders, local governments and community leaders, for the purpose of discussing the data provided by satellite monitoring, and working together to create solutions. In light of the ever-increasing levels of transparency that satellite monitoring brings, such institutions seem an inevitable and positive consequence of implementation.
However, given the severity of the contextual constraints hindering the industry’s sustainability, it is unlikely that such noble intentions (or even significant capital investments) will be capable of truly addressing the problem.
Satellite monitoring technology has dramatically expanded the realms of possibility for forest governance, yet its implementation in the palm oil sector remains hindered by the structures, institutions and political and legal realities of palm oil production, and producing countries more broadly, dramatically reducing its ability to create positive change. Whilst they are clearly useful tools for environmentally conscious actors aiming to reduce their deforestation risks, they are only one small piece in a very complex puzzle. The problem of tropical deforestation caused by palm oil expansion is at once an economic, political, social and historical problem. As such, ‘technological fixes’ or the actions of individual firms (or even groups of firms) are themselves unlikely to lead to significant environmental improvements. In order to address such a vast problem, the underlying context must shift. Nothing less than large-scale international public and private sector cooperation is required.
Isaac Caiger-Smith is a Junior Research Associate and undergraduate at the University of Sussex, studying philosophy politics and economics. His current research project focuses on the use of satellite monitoring technologies for addressing deforestation risks.
Izabela Delabre is a Research Fellow at the University of Sussex, examining sustainable forest governance, sustainable production and consumption of food, and sustainability transformations. Izabela worked for the Business and Biodiversity Conservation Programme at the Zoological Society of London (ZSL) managing ZSL’s global oil palm work. Her PhD (Human Geography) examined the political ecology of participatory impact assessment practices in the context of the Roundtable on Sustainable Palm Oil (RSPO) in Indonesia and Malaysia.
Kristjan Jespersen is an Associate 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.
By Kirsti Reitan Andersen and members of the Artsformation consortium
Two decades into the new millennium it is almost impossible to imagine a future in which digital technologies do not play a key role. Today, digitalisation changes the way things are done across business and society alike.
This includes for example the impact of new technologies on processes of democratisation, like the role of Facebook in the UK referendum in 2016. Or the increasing collection and analysis of personal data in the use of any social media. Another area in which technology is having an enormous impact is in our ways of communication and being together, for example through technologies like Zoom or Facetime.
Throughout history, the arts have always reflected major transitions as they unfold.
Therefore, it is perhaps no surprise that the social, environmental and economic consequences of the digital transformation are now also increasingly addressed by artists. For example, with the project SOMEONE (2019), Lauren McCarthy tries to address the advances in human-machine relationships represented in ‘smart houses’ and try to give back a human identity to artificial intelligent devices through active human participation.
As part of the H2020 research project Artsformation, we explore the current and potential role of the arts in the digital transformation. Exploring the role of the arts across both business and society, one part of the project has a particular focus on marginalized groups of people who today do not reap the acclaimed benefits of the digital transformation (e.g. Gangadharan and Niklas, 2019; Gebru, 2018; Neves, Franz, Munteanu and Baecker, 2018; Park and Humphry, 2019). In this context, the “socially engaged arts” (Bishop, 2012) is of particular interest.
In contrast to more traditional forms of art, socially engaged artists often work closely with their audiences in one way or other.
For example, by gaining in-depth knowledge of particular challenges in specific communities and creating awareness about such issues through the artwork or by directly engaging people in the production of art. One such example could be the engagement of people in the production of artwork using the so-called maker spaces as a place of work and thereby also introducing “audiences” to new digital technologies and skill sets. Catch, a center for art design and technology located in Elsinore, for example, has much experience facilitating such processes of learning.
In recent years we have seen artistic examinations of the digital transformation become increasingly complex, evolving from what we might understand as a fascination or embracement of digital tools to reflections on the transformation itself. In general, we find that socially engaged artists are addressing societal issues (of the digital transformation) in three ways (Andersen et al., 2020):
The artist as a commentator: The artist as a commentator is not directly concerned with audience engagement as part of the artistic process. The work of Dr. Ahmed Elgammal and an artificial intelligence named AICAN exemplifies “the artist as a commentator”. In this case Dr. Elgammal and AICON created an exhibition of prints called Faceless Portraits Transcending Time. While there is no direct audience engagement, the work of Dr. Elgammal and AICON brings attention to current debates about technology and creative work.
The artist as one who gives voice to a community: More than ever, artists have become ever more important as voices of reason and clarity, pressing for social justice and engaging the public conversation about the controversial issues shaping the world in which we live. Forensic Architecture’s attempt to raise awareness of oil and gas pollution in Vaca Muerta, Argentina, is a good illustration of this approach. Vaca Muerta has become one of the world’s largest shale oil and gas fields. It is also the home of indigenous communities, including some of the Mapuche people who live between Chile and Argentina. In collaboration with The Guardian newspaper, Forensic Architecture investigated a local Mapuche community’s claim that “the oil and gas industry has irreversibly damaged their ancestral homeland and eroded their traditional ways of life.”
The artist as a social entrepreneur: consults and facilitates a community problem in a much more ‘organised’ and ‘long-term’ manner than is typical of the two previous roles. This, for example, is what happened when artist Olafur Eliasson and engineer Frederik Ottesen at London’s Tate Modern launched the social enterprise Little Sun in 2012, setting out to change the world with ‘solar art’. Little Sun aims to bring clean, reliable and affordable energy to the 1.1 billion people who live without electricity while raising awareness of energy access and climate action worldwide. Eliasson demonstrates his conviction that art can change the world by continuing to promote Little Sun as an extension of his art practice, arguing that many of Little Sun’s “current and future projects stem from art, involve artistic thinking or use our products themselves to create art”.
While all three roles co-exist, intersect and share the ability to imagine new ways and generate change, each role does so in slightly different ways. We suggest that each of the three roles requires artists to organise in different ways, which may also impact the kinds of change they can facilitate. Moving forward, we are extremely eager to explore the ways in which artists as social entrepreneurs may inspire and offer new and more sustainable ways of organizing.
Kirsti Reitan Andersen is a Post Doc at the Department of Management, Society and Communication, Copenhagen Business School. In her current work, she explores the role of the arts in the transformation towards more sustainable ways of organizing.
Demographic megatrends, such as ageing populations, challenges public health budgets in developed countries. Currently, health costs in OECD countries are growing at roughly double the rate as the average growth in GPD. ‘Pay for Success’ is an emergent, and highly innovative, partnership model promising both increased cost-effectiveness and patient-centric services in healthcare. Whether or not the model will constitute a critical feature of future health systems, only time will tell.
Due to critical leaps in modern healthcare and medicine, the average life expectancy in developed countries has doubled since 1900 [1]. While this is an important success, it also challenges public health systems because chronic diseases occur much more often at old age. In fact, a Danish report states that the average health costs for an 86-year-old are 16 times higher than for a 20-year-old [2].
In addition, public health sectors are experiencing structural challenges inhibiting their capacity to deliver services effectively.
The lack of systematic assessments towards quality and outcomes of services creates disproportionality on financial priorities. Evidence indicates that up to 30% of healthcare expenses are wasted on unproven or unnecessary treatments.
World Economic Forum 2017
An example of this is the general de-prioritization of preventive health interventions over short-term illness treatment.
Introducing ‘Pay for Success’
‘Pay for Success’ (PFS) has emerged as an organizational solution to the problems of asymmetry and ineffectiveness in public health. A PFS-program is fundamentally a public commissioning model based on two distinctive features 1) an outcome-based contract and 2) the engagement of an external ‘investor’.
In an outcome-based contract service delivery is outsourced to a provider and the public commissioner pays for the realization of long-term health outcomes. Hence, the public “pays for success”. Because services, such as preventive interventions, could take several years to deliver the PFS-model involves an ‘investor’ that provides working capital for the provider – and thus, takes the majority of the financial risk. This could either be a non-profit organization, a for-profit organization, or both. The first PFS-program was developed in 2010 and since then 200 programs have been initiated mobilizing a total capital of 420 Million Dollar [3]. Especially in the UK, the PFS-market has grown and is predicted to soon reach a total value of 1 Billion Euro (Carter 2019).
A simplification of the PFS-model inspired by Third Sector (2016)
Challenges and future directions of ‘Pay for Success’
While empirical studies from the UK and US does indicate that the PFS-model performs better than other commissioning models [4], they also highlight a more complex organizational structure that takes time and resources to develop – which, consequently, creates high transaction costs ultimately challenging the model’s cost-effectiveness. Technical problems related to valuating health outcomes, and creating a payment structure around such, has proven difficult and time-consuming. Additionally, the complex governance structure of PFS-programs in the UK and US has been criticized for being too rigid and focused on short-term performance – thus, inhibiting innovation.
The emergence of PFS-programs in Scandinavian countries poses an interesting field as emerging research indicates that these programs are fundamentally different from traditional PFS-models. The tendency to utilize more networked practices as well as the existence of comprehensive public data systems in Scandinavian welfare states could potentially solve some of the most critical challenges currently faced in PFS-development. What would seem critical for future PFS-development is to leverage these emerging insights and shine more light into the ‘black box’ of PFS-development.
Mikkel Munksgaard Andersen is Ph.D. Fellow at CBS, MSC. Through his Ph.D.-project, Mikkel studies the development and implementation of social impact bonds and payment-by-results methods in Denmark. His work centralizes around the distinct characteristics of Scandinavian impact bonds and their role in supporting and financing public services. The research takes a point of departure in the Danish research- and innovation project PreCare which seeks to develop new services and organizational models for preventive and digitalized healthcare. See more here.
With more than USD 12 billion spent the 2020 US election cycle may well have been the most expensive political campaign in the world so far. Yet in the shadows of this epic political contest another campaign unfolded that in my view provides some really interesting early signals on emerging trends in corporate political activity.
Alongside the national election Californians went to vote on a number of plebiscitary ballot measures. Among them Proposition 22 that like no other exemplifies how business lobbying unfolds in the era of what is often called the gig-and platform economy.
Prop 22, as it is known for short, was spearheaded by Uber and Lyft as a last ditch effort after exhausting all judicial and legislative tactics to win an exemption from a new Californian labor law that aimed to force these companies to classify their drivers as employees, rather than independent contractors.
A special type of thing
Leaving aside the merits of the argument – as consequential and hard to defend the position of Uber and peers may be- Prop 22 is remarkable on many fronts. It exemplifies the growing use of what was once meant to be a plebiscitary counterweight to corporate influence by these very corporate actors to advance their own interests.
It saw platform companies that connect millions of drivers and tens of millions of passengers in so called two-sided markets take fully advantage of these relationships by intensely lobbying and mobilizing these constituencies for their cause.
It witnessed the deployment of targeted push messages and suggestive survey snippets through the proprietary app infrastructure, administered and tracked by a black-box algorithm that also sets prices and assigns business opportunities and thus commands Foucauldian-like disciplinary allure. Which driver would want to be seen and classified to be unsupportive of the company’s political project while the day’s earnings depend on being assigned this one lucrative trip to the airport?
Ballot 22 also starkly illustrates the chimera of political equality or of even the resemblance of a level playing field in a world with unconstrained campaign expenditures that resulted in the gig-side outspending the labor side by a factor of 10 to 1. And it is truly remarkable in its brazen disregard of democratic legitimacy. It aimed to expressly derail a provision that was not hidden on page 1205 of a large body of complex legislation and stealthily whisked through without much public scrutiny. Instead it took aim at a piece of legislation that had been in the public, even international spotlight for quite some time, extensively discussed and lobbied on and resoundingly tested and confirmed in court.
Even more astounding, Prop 22 sought to prevent any future democratic course correction through including a clause that would require an unprecedented 7/8 supermajority in the legislature for overturning it – a much higher hurdle than is set for amending the US constitution.
All these features are fascinating in themselves and deserve a much more detailed examination which has already begun in academic circles, for example with regard to platform-led mobilization or data-driven corporate advocacy and to which I hope to contribute to in a longer essay elsewhere soon. Here and now I just wanted to offer some very early and unpolished ideas on one more, largely overlooked angle that makes Prop 22 and the corporate political actions of Uber et al. so fascinating.
In very broad brushes the thinking here goes as follows:
Businesses that are not explicitly chartered as public benefits corporations derive their social license to operate primarily by making a positive economic contribution in terms of innovation, resource efficiency et al. (and yes, by doing this as responsible corporate citizens that respect the spirit of applicable laws, planetary boundaries etc.). The longer-term ability of a company to be financially self-sustaining in a competitive, externality-free market situation is – absent any other claims about achieving non-financial societal benefits – a first approximation for such a positive economic contribution.
Society puts a higher economic value on the contribution of the corporation than the costs of its fairly priced inputs. The business model adds overall economic value, the business organization – not just the people involved in it as individuals claiming their citizenship rights – can invoke this overall economic contribution to justify a certain degree of standing in the democratic discourse.
Yet this is precisely not the case with companies such as Uber and Lyft. They have been losing vast sums of money for years, bleeding cash on every ride even while exploiting many regulatory gaps that lower their cost structures relative to their competitors in the ride-hailing business. All this was made possible by enormous sums of venture capital funding – USD 26 billion for Uber alone up until April 2020. Venture funders bet on those companies to eventually achieve a winner-takes-most status and commensurate pricing power in a market characterized by strong network effects and economies of scale /scope.
The envisioned route to economic dominance, however, also requires to simultaneously build and assert the political influence necessary to stave off regulatory efforts such as categorizing drivers as employees and many other pricey regulations that threaten to close the very regulatory arbitrage opportunities on which large parts of the business model of Uber, Lyft and other gig companies are ultimately built.
Overall this results in a situation where venture-funding is at least as much about blitz-scaling political power as it is about financing hyper-growth for market dominance. Both are necessary, both reinforce each other. The build-up of political good will and supportive constituencies is not a by-product of building customer loyalty. It is an essential part of the strategy to architect a business model that critically depends on regulatory accommodation and complicity. Yet, all along and rather ironically this heavy reliance on political action and political success stands in stark contrast to the relative normative weakness of claims made by companies without a clear route to profitability that cannot convincingly back up their political voice with an obvious net positive contribution to overall economic welfare. Stripping away all ornaments what’s left is a story of VC-funded particularistic political rent-seeking.
Now, much more needs to be explored here and there are many holes that can be punched into this storyline as described in these very broad terms. So please check back here soon for a more developed version of this argument. In the meantime I would love to hear your comments and criticism to help advance this conversation.
Epi-epilogue
Uber et al. won Prop 22 by a large margin of 58% to 41%. Prop 22 turned out to be the most expensive ballot initiative in US history. So far. After the vote Uber’s CEO announced in an analyst call that the company will “more loudly advocate for laws like Prop 22 [and] work with governments across the US and the world to make this a reality.” The company continues to loose large sums of money.
About the Author
Dieter Zinnbauer is a Marie-Skłodowska-Curie Fellow at CBS’ Department of Management, Society and Communication. His CBS research focuses on business as political actor in the context of big data, populism and “corporate purpose fatigue”.
As a number of the CBS Sustainability blogs have mentioned since March 2020, the official reactions to Covid-19 have (so far) not been doing much for sustainable development (apart from lower CO2 emissions from air travel). Despite concerned voices criticizing the limited attention to combating climate change (‘environmental sustainability’) in the longer run, little impact on policy makers has been registered.
If we focus on ‘social sustainability’ the picture is similar. Discussing the social side of sustainability is part and parcel of assessing the situation in the informal sector and among the estimated two billion people reliant on their livelihoods through the informal activities across the Globe. Sadly, the situation has shown that this group of people and their families have suffered from the imposed restrictions due to Covid-19 (see here).
While the negative impact on income and livelihoods probably is the most severe consequence of inability, lack of willingness (and in some cases maybe even sheer ignorance) among authorities, the events since March can also be viewed ‘an opportunity missed’ regarding (more) sustainable practices.
The classical example is waste handling where informal workers (or scavengers) are involved in waste collection, sorting and identifying material for recycling and reuse. The Indian system where almost all component of waste are sorted and reused is well-known. But additional examples are found in areas like minimizing food waste and establishing social safety nets (Tucker and Anantharaman, 2020). Had governments appreciated the role of the informal sector and the activities undertaken, the period since March could have been used to change towards a ‘sustainability footprint’.
So, instead of using the (unfortunate) challenge to aim for positive change why have governments then been so keen to do the opposite and merely lockdown the informal sector (including denying poor people of their meagre livelihoods)? As Tucker and Anantharaman (2020) argue, it might be due to informal work being perceived as a ‘deficit’ (lack of contracts, lack of permits, lack of tax payment, lack of this and lack of that). International organisations like ILO have long been arguing in favor of ‘formalization of the informal’ (ILO, 2019). And not to romantize the informal sector, nevertheless it is intriguing that this is and has not been a sector perceived as ‘creative, agile, flexible’ and all the buzz that the present glorification of the private sector and individual initiative otherwise has been marked by.
Now, we can’t change what have been the typical type of reactions to the Covid-19 situation across the globe, but we do note that we have increasing social challenges ahead due to rising poverty levels, the naïve, optimistic wish for the New Year is that attention will be placed on how to engage the informal sector and all its resources in the strive for a more sustainable development path. It will not only open up the Pandora’s box regarding new and valuable ways on dealing with the Global trajectories, but could provide avenues for the informal sector to be reckoned as ‘a contributor’ (instead of ‘a deficit’).
Søren Jeppesen is Associate Professor at the Department of Management, Society and Communication at Copenhagen Business School. His research concerns the development of firms in developing countries. He focuses on SMEs, CSR and driving forces (or lack of same) for strategies of SMEs in developing countries in engaging in CSR (or not engaging).
The number of products advertised as “green” or climate neutral has exploded in recent years, according to several newspaper articles.Should we be alarmed? To some extent, yes. In addition to cases of blatant fraud and manipulation, there is reason to be concerned when a plethora of green labels for products – ranging from milk over burgers to gasoline – competes for attention, especially when the variety confuses understandings of what it means to be sustainable.
Moreover, since carbon offset programs tend to obscure the fact that neither air travel nor fashion clothing is or can be CO2 neutral, the need to question and test green advertising claims is more pressing than ever. It is therefore commendable that politicians and NGOs in some countries call for more control with corporations that claim to market green or CO2 neutral products.
The growth in green advertising claims attracts increased scrutiny, regulation and control.
At the same time, the expansion in green advertising claims illustrates the growing social, political and economic premium put on sustainability. Even if many such claims are superficial and hypocritical, their combined existence is performative beyond what individual corporations, NGOs and regulators can imagine and control.
When all social actors express the significance of sustainability, something has changed.
Scholars of communication often emphasize that communication is constitutive of organizational and social reality. Communication, in their view, is performative because it does something more than simply describe a preexisting reality. Yet, in what sense does this logic apply to issues of climate change and the broader sustainability arena?
To what extent has communication performative potential in the sustainability arena?
Critics of the performative view on communication view argue that green messages often fail to change anything, either because the senders are insincere or because larger social forces, such as profit motives or efficiency demands, override any talk about sustainability. The power of sustainability communication to shape organizational practices is therefore often described as naïve or overly optimistic. These are important objections to the performativity perspective. Yet, communication still plays a significant role in instigating better practices.
The articulation of sustainability ideals is often “the leading incident” in its performance (Austin, 1962, p. 8).
It is certainly true that sustainability communication is insufficient in and of itself to ensure more sustainable practices. Some sustainability claims may even prevent organizations from moving in the right direction. Nonetheless, communication about sustainability is an important dimension of sustainable action. Without a communicative engagement of major corporations with the values and ideals of sustainability, changes in that arena are likely to be significantly slower.
Interestingly, critique and control of sustainability claims may help such claims to perform.
Talk about sustainability and green products tend to attract attention of critical stakeholders and increase internal and external pressure to walk the talk. Bold statements combined with public exposure and critique are important dimensions of what we might call the performativity “cocktail”. Green advertising claims and public statements about CO2 neutrality can be used to apply pressure on corporations and remind them of their promises. If major corporations, out of fear of attracting negative stakeholder attention, decide to remain silent on the sustainability issue, critics and regulators have less material to work with. In other words, a willingness on the part of corporations to expose themselves to critique is key.
Communicative performativity in the sustainability arena is a macro phenomenon.
Obviously, an organization does not become sustainable by simply “talking green”. In fact, it is a mistake to think of performativity – especially in complex areas such as sustainability – as a result of discrete and isolated organizational messages or claims. It doesn’t work that way. Even with the best intentions, green talk takes considerable time and effort to materialize into more sustainable practices. Moreover, it is rarely an organizational effect. Performativity is an outcome of multiple claims that are repeated and reformulated again and again over time and across multiple organizations, public as well as private. The sedimented effect of such dynamic interaction that lead to what Butler (2010) calls “socially binding consequences” (p. 147).
The performativity of sustainability claims should be understood as sedimented effects of multiple claims and understandings.
The communicative performativity of sustainability claims involve reactions of stakeholders, competitors, legislators and consumers who are variously affected, inspired or provoked by the claims to expect and demand better practices. Still, there is no guarantee that the claims will stimulate significant changes. That, of course, is true for all types of messages. Messages and claims can be ignored, forgotten or outright contradicted by subsequent claims or other types of action. Without the claims, however, society and the physical environment is likely to be worse off. The trick is to use them actively to remind the senders of their social and environmental responsibilities.
Recent developments in politics, especially during the American election, but also within the Danish system, has inspired a lot of talk about how social media is breeding polarization and radicalized opinions. However, from my experience, polarization is often seen as something that only happens to “those people” – often those of opposing views, and as a result, we often fail to recognize that we ourselves might fall victim to the issue of polarization.
So, with this blog I hope to encourage you to think about how this could be happening to you – and maybe also help you recognize it when it is happening for “those people”, because polarization is a growing problem in our society.
What is it?
Polarization – it refers to the division of people or opinions into opposing groups, and while it has been discussed since the 1800s, it has gotten much worse with the emergence of social media.
This is especially seen with regards to politics, in particular in countries with two-party systems, but research suggests that there is also significant levels of political polarization in countries with plurality electoral rule (Urman 2020). Importantly, polarization also extends beyond the political system, and it is a growing issue within society, and this is not just about Apple vs Android or Pc vs Mac, this is happening within both the climate change and the anti-vaccine debate, and it is sowing conflict and stopping us from collectively working to solve global challenges.
How does it emerge?
Often when I hear people talking about this topic, they talk about how certain groups of people (rarely themselves) manage to seclude themselves from opposing views. This is what is called selective exposure, and it refers to how certain people only pick news and information that align with their views.
This often leads to the growth of the so-called “echo chambers”, where the same opinions are echoed back to you again and again – eventually reinforcing current views and potentially leading to more radicalized opinions.
Of course, a lot of you are actively seeking out opposing opinions, and might therefore not see polarization as an issue for you. However, there are some problems with only seeing polarization as something that emerge when people seclude themselves from opposing views, in particular two things are in my opinion overlooked:
Exposure to opposing views has actually been found to increase polarization (Bail et al. 2018). This means that just because you might be aware of the trap of selective exposure, and actively seek out opposing opinions you might not avoid the issue of polarization.
Polarization is not just a product of the news sources you are exposed to – but just as much, a result of the people you surround yourself with. This tendency for us to surround ourselves with like-minded others is often referred to as homophily.
Homophily, is, from my experience, often overlooked in conversations about polarization, and that’s a mistake, because as humans we all tend to engage with and follow people that are interested in the same things. We watch YouTube videos about things that we are interested in, and we follow people on Twitter and Facebook that are similar to us – just take a look at who you follow on Twitter and I suspect that most are either from within your profession or share your world-views. Importantly, you also need to remember, that this behavior is further amplified by the social media platforms that are built to cultivate this, to consume as much of our time as possible and to ensure that we keep using the platform. So just by using these platforms, you might fall victim to increased polarization.
Why is it a problem?
Throughout history the idea of a “good” debate has always emphasized the importance of diversity – and not only that you are exposed to different views, but also that you listen to people with opposing views. However, when you mainly listen to opinions and information shared by linked-minded others, or information confirming your current views, we end up with the echo chambers, where you constantly are exposed to “echoes” of the same opinions. This is highly problematic, because not only does it stop people from developing their current views, it can also lead to more radicalized opinions.
One example from my own research is from my analysis of climate deniers that often discuss the issue of climate change within more polarized communities. However, while some of these are willing to engage in debates about the issue, others fall victim to the same stories being echoed over and over again. In one of the more extreme cases I have seen how a group of people are arguing that climate change is happening because of a giant red dragon flying around our solar system, hiding behind a second sun. And while I am skeptical about their “evidence”, which includes badly photo shopped images or optical illusions, I also see that others, because it is shared by like-minded others, accepts the “proof” and how it reinforces their belief in the narrative.
What’s next?
Naturally, I am not saying that any of you believe in a giant red dragon flying around our solar system causing climate change by spitting fireballs, but every time I have investigated an echo chamber, I see that they are certain that they are in the right, and that the other side is being brainwashed. Of course, the fact that a smaller group of people believe this theory might not be a problem in itself, but as we have seen time and time again, radicalized ideas seeps into the general debate, such as Mark Zuckerberg being a robot or in the Pizzagate-case that was covered previously on this blog. I just hope, that with this blog I have inspired you to be aware of the growing polarization in society, to think about how you might experience polarization in your everyday life, and reminded you that it is about more than excluding yourself from opposing views, because polarization and radicalization is a growing issue that goes well beyond politics.
About the Author
Daniel Lundgaard is a PhD Fellow at the Department of Management, Society and Communication at Copenhagen Business School. His research investigates how communication on social media (e.g. the use of emotions, certain forms of framing or linguistic features) shapes the ways we discuss and think about organizational and societal responsibilities.
Over the last decade, the term ‘precarity’ has become ubiquitous in studies of work and labor, as jobs are increasingly characterized by temporary and insecure contracts; lack of basic welfare provisions such as paid leave; and low pay. The informalization of work has gained pace in a post-Fordist world. And we can expect to see more precarity. The COVID-19 pandemic is pushing employers the world over to think of new ways to reduce labor costs as economies flounder.
Anthropologist of work Kathleen Millar has argued that we need to be careful about how we think about ‘precarity’ when we talk about insecure work. The term can inadvertently “smuggle in a conservative politics”, valorizing and romanticizing a Fordist past of full-time wage labor. This employment past is not universal. In the majority of the world, economies have historically been characterized by informality. Here, formal secure work has been more of an idea, a promise tied up in teleological ideals of modernization and development, than a reality. Furthermore, in former settler colonies such as Kenya and South Africa, formal wage employment has roots in colonial capitalism, coercion and exploitation.
I’ve been thinking about precarity through the case of changing employment conditions on Kenyan tea plantations, where I’ve been researching the production of certified sustainable tea as part of the SUSTEIN project. I carried out my latest fieldwork between January and March this year, right up until the majority of European countries went into lockdown. A few weeks later, Kenya followed suit. In Kericho, the heart of Kenya’s tea production and where I spent most of my stay, there was little sense that the world was on the brink of an impending global pandemic, let alone reflection on what that could mean for the tea industry. And yet, in conversations with diverse actors in the sector, there was a shared narrative that the industry, responsible for one of Kenya’s biggest export commodities and foreign exchange earners, was struggling.
Enduring low prices of tea on the global market and rising costs of production have led multinational companies owning large tea plantations to look for ways to cut labor costs.
Tea is a labor intensive crop, and companies have historically depended on large resident workforces to pluck tea, plant and prune tea bushes and operate factories, among a multitude of other tasks required to maintain vast tea plantations. Biannual collective bargaining agreements led by the workers’ union have seen wages increase at a rate companies say is unsustainable for business. Citing high wages relative to other agricultural sectors in Kenya and the additional costs of employee benefits such as free housing and water, payment of retirement funds, and contributions to health insurance, along with the costs of maintaining infrastructures used by workers and their dependents such as schools and dispensaries, companies argue for the need to reduce labor forces.
The gradual reduction of company-employed low-level or ‘general’ workers has been taking place through parallel processes of mechanizing tea harvesting and outsourcing tasks outside of companies’ core activities of tea harvesting and factory processing. While workers carrying out core tasks continue to be employed directly by the company, thus receiving a union-negotiated wage and the package of employment privileges described above, outsourced workers are hired on insecure terms by external service providers who hold contracts with tea plantation companies. Outsourced workers are typically employed on short contracts, sometimes for as little as a few days. This renders them ineligible for union membership, and most earn less than half the daily salary of a company employee. If they are unable to work due to sickness, they will not be paid. The contractors who employ them are required by the company to make deductions from their salaries to national health insurance and social security schemes, but low wages and short-term employment mean that contributions are meagre.
Kenya has a large work-seeking population, and people are prepared to take outsourced jobs because of few employment opportunities.
In spite of the striking unsustainability of labor outsourcing for these workers, international sustainability standards say surprisingly little about this category and establish few mechanisms to safeguard them.
In the context of decreasing opportunities for employment in permanent company jobs on tea plantations, current and former workers talk with nostalgia about a time when company jobs and their related securities were a plenty. This nostalgia echoes the valorization of stable, full-time wage labor that Millar identifies as lurking in the notion of precarity. But, without dismissing workers’ nostalgia, we should be careful not to romanticize plantation jobs of the past which were, in spite of their securities relative to outsourced work, inherently precarious.
During the early twentieth century, the colonial administration sought to disrupt and undermine subsistence economies so that people would be forced to seek work on infrastructure projects and in settler industry and agriculture, including tea plantations. For decades, the industry struggled with labor shortage which undermined its growth and expansion. During the 1940s and 50s, efforts were made to create permanent resident labor forces through welfare provisions such as housing, kitchen gardens and retirement funds. Yet workers could never own the houses they lived in, nor the land they were given to cultivate, which remained the property of the company.
In seeking to create a stable workforce that could make Kenya’s tea industry sustainable, the colonial administration destabilized rural economies and created a class of people who would be forced, for generations, to seek wage labor.
If, in these uncertain times, we shouldn’t wish for a whole-sale return to permanent, full-time wage labor, what might we hope for instead? Millar argues for a critical politics of precarity that problematizes the centrality of economically productive work and its promise in contemporary capitalism rather than calling for a return to stable full-time work. Campaigns that propose alternatives to work include Universal Basic Income – where governments makes regular unconditional payments to every individual – and Universal Basic Services. A 2017 study by UCL’s Institute for Global Prosperity proposing Universal Basic Services in the UK argues that government provision of basic services such as food, shelter and transport has the potential to reduce dramatically the cost of living for those on the lowest incomes, making participation, belonging and cohesion possible in the face of increasingly precarious work. These initiatives are becoming more compelling as the world reels from the pandemic and we try to imagine a recovery that prioritizes social and environmental justice.
Hannah Elliott is a postdoc at MSC focusing broadly on the political and economic anthropology, in particular in eastern Africa where she has been conducting research since 2009. Her current research examines the production of certified sustainable tea in Kenya as part of the SUSTEIN project.
How can cities self-finance environmental and social solutions?
By Luise Noring
Every week, more than three million people move into cities looking for places to work and live. This puts an enormous strain on cities’ finances and capacity to provide for their residents. We can no longer – if we ever could – assume that taxes will pay for growing urban populations with growing demands for public infrastructure, goods and services. We need to find new ways of delivering and financing good societies for the billions of people living and working in cities.
Therefore, the challenge is not only to find the best environmental and social solutions for cities, but also to address how these solutions can be delivered and financed. All too often, for example, brilliant climate solutions are presented, but nobody wants to take responsibility for delivering and financing them. All too often, we hear of good solutions for social preventive action and public health that are never put into action. The solutions are there. The challenge is that the business case and investment proposition are either weak or non-existent. As a result, the only one with the incentive to implement the solutions is the cash-strapped government itself.
Hopeful scholars demonstrate how investing taxpayers’ money today could prevent massive expenditure tomorrow. Yet today’s tax revenues are already accounted for to pay for schools, roads, housing, hospitals, etc. This leads me to my principal research question and mission in life:
How do we deliver and finance better societies?
All too often, the only financial solution on the table is to increase and spend tax revenue. But there is no financial innovation in increasing and spending taxes. This ‘solution’ just means that bonds are repaid with future taxes even though we know full well that, in the future, taxes will still be needed to finance schools, roads, housing, hospitals, etc. Spending future taxes today only jeopardizes future generations’ ability to finance their schools, roads, housing, hospitals, etc. The same applies to tax increment financing (TIF), which is a common practice in urban development and economic revitalisation used in the US and subsequently adapted across much of the world.
The idea behind TIF is that local governments issue bonds based on future tax revenue increases. TIF assumes that urban regeneration can be financed by bonds that are serviced and repaid by future tax revenue increases. The proceeds of the TIF bonds are thus used to stimulate economic development through investments in urban regeneration, infrastructure and other public goods. The bonds are repaid mainly through property taxes resulting from investments and development activities. What happens though when the public investments fail to increase tax revenue paid by private owners? In such cases, local governments remain obliged to repay the government- guaranteed bonds.
Conventionally, in the US, local property taxes fund elementary and secondly education, supplemented by federal and state contributions. However, when future property taxes are used to finance infrastructure, public investment capital is in effect flowing from elementary and secondly education to infrastructure and other development activities in order to secure projected tax increases.
Thus, while TIF creates new economic development opportunities in one area, such as derelict neighbourhoods, it hollows out potential future investments in other areas, such as education.
Finally, it is common in many US cities for governments to woo private investment by offering tax reductions or exemptions. This amounts to making investments today with the tax revenues of tomorrow. This is how cities acquire unfunded liabilities.
The above paints a bleak picture of future financing of good solutions for better societies. However, during my research, I have come across many sound finance mechanisms. For instance, land value capture (LVC), which is commonly used in Northern Europe. LVC bundles publicly owned land, such as former port and military areas, or areas over which the public can take ownership, such as derelict areas. Once the local government has secured land ownership, it rezones and repurposes the land.
For example, former industrial land can be repurposed for commercial and residential use. This increases land values, which enables the government to take out loans based on the increased value of the land. With renewed borrowed capital, local government can make infrastructure and other investments in the land. This again increases land values. Once the land has been properly matured, it is sold to private investors and developers, including institutional investors, such as pension funds. Revenues from land sales are used to service and repay the debts. You can read more about this model in my Copenhagen City & Port Development report.
Another solution is for local government toraise seed capital, for instance from philanthropies, pension funds and other large institutional investors that invest with long time horizons. This seed capital is used in projects as low-yield and high-risk investment capital that is capable of attracting other investments that are more high yield and low risk. Once projects have been realised, they are refinanced, and the seed capital is withdrawn and put into another project. This is a kind of project-by-project financing. You can read more about this model in my Cincinnati Development Corporation report.
This blog post has offered a snapshot of several research projects I have conducted over the years. All my works contain key enabling features for replication, which allow me to scale solutions to other cities. If you want to learn more, please visit this page or get in touch with me: lno.msc@cbs.dk.
Dr. Luise Noring is an Assistant Professor at CBS, where she also attained her Ph.D. in supply chain partnerships. Noring challenges taken-for-granted and commonsense solutions – which are only ever taken-for-granted and commonsense within their specific contexts. Part of what makes her work innovative and has assured its impact in research and practice is precisely her insistence on reaching across national and sectoral contexts, drawing experiences from a great diversity of urban systems. This has allowed Noring to identify what kinds of city solutions work best in particular contexts and how certain kinds of institutional vehicles and finance mechanisms can be adapted to diverse cities and countries.
Lessons learned from the responsible behaviors of individuals during the Covid-19 crisis
By Fumiko Kano Glückstad
The Covid 19-crisis has had – and still has – a very serious impact on a global scale. The New Normal guideline published by WHO [1] suggests that the responsible behaviors of individuals during the Covid-19 crisis have a critical impact on how a country is able to control the spread of infection. However, the reactions of individuals to aspects of the New Normal such as “social distancing” and “wearing a mask” have been considerably diverse depending on who they are and which society they belong to [2].
Who they are?
To overcome a challenge like the Covid-19 crisis, but also e.g. the long-term crisis on climate change, socially responsible behaviors from individuals are required. Roughly speaking, such behavioral changes may be motivated by four types of personal value priorities [3]: i) anxiety-free values, ii) anxiety-based values; iii) personal-focused values; and iv) social-focused values (See the Figure).
Socializers and social control agents discourage values that clash with the smooth functioning of significant groups or the larger society. Values that clash with human nature are unlikely to be important. The basic social function of values is to motivate and control the behavior of group members (Parsons, 1951). Two mechanisms are critical. First, values serve as internalized guides for individuals; they relieve the group of the necessity for constant social control. Second, people invoke values to define particular behaviors as socially appropriate, to justify their demands on others, and to elicit desired behaviors. Socializers seek, consciously or not, to instill values that promote group survival and prosperity.
Schwartz, 2012, page 12
This statement is highly relevant to the two aforementioned challenges: Covid-19 and climate change.
Let us for instance think about the economic situation that the Covid 19 crisis has brought upon the tourism and experience economy (EE) sector. In order to thrive and secure the jobs of the employees involved in the sector, the EE sector needs to maintain a certain number of tourists visiting its destinations. On the other hand, society needs to prevent further spreading of Covid-19. Hence, the responsible behaviors of individuals expressed in association with their travel activities play a crucial role in maintaining the EE businesses.
However, individuals’ attitudes to traveling and to the Covid-19 crisis substantially differ, and manifest in different behaviors. For example, some individuals may prefer to enjoy traveling because they prioritize “personal-focused” values, seeking to fulfill their hedonistic needs, their needs of self-expression and to obtain a sense of achievement. Such internalized personal values may trigger a negative reaction to the constant social control enforced by Covid-19. On the other hand, a person inclined to “social-focused” values may instead tend to choose socially appropriate behaviors required to prevent the spread of Covid-19.
Which society they belong to?
While the value priorities of individuals within and across societies may differ, cultures also influence the formation of selves. Markus & Kitayama’s [4][5] phenomenal theory, ‘Culture and Self’, defines the independent and the interdependent self-schemas that demonstrate “how sociocultural contexts can shape self-functioning and psychological functioning (Markus & Kitayama, 2010, page 425)”.
Adapted from Markus & Kitayama (2010)
Markus and
Kitayama (2001; 2010) explain that:
When an independent schema of self organizes behavior, the primary referent is the individual’s own thoughts, feelings, and actions. Alternatively, when an interdependent schema of self organizes behavior, the immediate referent is the thoughts, feelings, and actions of others with whom the person is in a relationship.
Markus and Kitayama, 2010, page 423
Accordingly, feelings of happiness also differ depending on whether a person is rooted in a culture emphasizing the independent or interdependent self-schemas [6].
Specifically, in North America happiness may most typically be construed as a state contingent on both personal achievement and positivity of the personal self. Negative features of the self and negative feelings are thus perceived to be a hindrance against positivity and happiness. In contrast, in East Asia happiness is likely to be construed as a state that is contingent on social harmony and, thus, on a balance among different selves in a relationship.
Uchida, Norasakkunkit, & Kitayama 2004, page 227
Following the arguments of the aforementioned East Asian cross-cultural psychologists, the formation of value priorities might have been influenced by such culture-rooted self-schemas. Thus, the value priorities and culture-dependent self-schemas of individuals become important factors when scholars do research on sustainable and responsible consumer behaviors. In other words, if the mechanism of feeling happiness is fundamentally different between the independent and the interdependent cultures or between the social- or the personal-focused individuals, the motivations for behaving in a socially responsible way may substantially differ.
Socially responsible reaction to the New Normal
These
existing individual and cultural differences may cause us to think about the definition
of “socially responsible behaviors” in the context of the Covid-19 crisis.
On
Wikipedia, “social responsibility” is defined in the following way:
Social responsibility is an ethical framework and suggests that an individual has an obligation to work and cooperate with other individuals and organizations for the benefit of society at large. Social responsibility is a duty every individual has to perform so as to maintain a balance between the economy and the ecosystems. A trade-off may exist between economic development, in the material sense, and the welfare of the society and environment…
From this
viewpoint, the Covid-19 crisis could be an excellent opportunity for
individuals to exercise “socially responsible behaviors” for the benefit of
society, i.e. in order to return to a Covid-19 free society. However, it generally
seems that the young generation of Scandinavians who have been world-leading in
sustainable behavior changes have been less engaged in the socially responsible
behaviors encouraged during the Covid-19 crisis. What we have learned from the
Covid-19 crisis is that the cultures emphasizing the interdependent self-schema
have had a smoother path to the New Normal behaviors.
An Australian writer, Paul De Vries posted his interesting observation of the Japanese people’s reactions to Covid-19 in Japan Times [7]:
A stumbling block of the “assumption of carrier” countermeasure is that it requires people to endure discomfort for the sake of the collective good, despite the likelihood of being COVID-19 free. Persuading a critical mass of the population to accept such an imposition is a challenging task, especially when new case numbers are in decline.
Three of the motivating factors that induce Japanese nationals to adhere are courtesy, obligation and shame. Courtesy is the willingness to act out of genuine concern for others. Obligation involves placing the needs of the group before those of oneself. Shame is fear of what others might think if one does not comply to group or societal norms.
There is no shortage of courtesy among the silent majority of the West, as unlikely as that can sometimes seem. A sense of obligation also exists, but typically toward groups less large than society as a whole. Shame, on the other hand, is not a dominant Western trait.
Cultural sensitivity and diversities in the measuring of sustainable development
The diverse reactions to the Covid-19 crisis observed in the past months are good examples demonstrating a need “to prepare a new cultural map of developmental goals, and to create and adapt development indexes that are more culturally sensitive[2]”.
However, the mapping of cultural differences is not enough to capture heterogeneities of the respective societies. Here, the individuals’ value priorities play in. The theory of basic human values by Schwartz [3] implies that individuals prioritizing the “self-transcendence” value, for example, might be more prone to engage in the socially appropriate behaviors specifically required to prevent the spread of Covid-19. In order to effectively implement a policy for the various sustainable development goals, a new cultural map integrating the heterogeneities of societies will become necessary. In this way, a policy maker could distinguish messages suitable for the respective target segments and optimize their effects on the citizens’ responsible behaviors.
The recent development of machine learning technologies has made it possible to classify populations into such personal value typologies, to describe who they are, and to predict how they will respond to various situations [8]. In our project, UMAMI (Understanding Mindsets Across Markets, Internationally) [9], we developed a workflow and methodologies to investigate such heterogeneities of societies based on personal value priorities. It would be interesting to explore how these can be exploited in various application domains addressing the sustainable development goals in the coming years.
[8] Albers, K. J., Mørup, M., Schmidt, M. N., & Glückstad, F. K. (2020). Predictive evaluation of human value segmentations. The Journal of Mathematical Sociology, 1–28. https://doi.org/10.1080/0022250X.2020.1811277
Fumiko Kano Glückstad is Associate Professor of Cross-Cultural Cognition at Copenhagen Business School. She works in the area of cross-cultural psychology. She has developed a workflow and methodologies enabling data-driven segmentation and typological analysis of consumers based on their personal value priorities in close collaboration with the Section of Cognitive Systems, DTU Compute at the Technical University of Denmark during the UMAMI project (2017-2020) funded by Innovation Fund Denmark. She previously worked as a consumer researcher and product concept designer of kitchen appliances at Panasonic Corporation, Japan and as a Japanese market specialist at Phase One A/S, Denmark.
Sorry I am late in sending a 50th birthday card for Milton Friedman’s essay “The Social Responsibility of Business Is to Increase Its Profits [1]. Many would say that it is a birthday not worth celebrating. I agree with my colleagues Steen Vallentin (see blog) and Sandra Waddock (see blog) that we should move beyond Friedman’s assumptions and prescriptions. So why do I use a seemingly outdated newspaper article in my introductions to courses on corporate social responsibility (CSR)? In Steen’s terms, should I continue to flog the ‘somewhat dead horse’? As I think this horse still has legs I wouldn’t flog it, but I would continue to take some of the CSR journey with it. And here’s why.
By reading and thinking about “The Social Responsibility of Business Is to Increase Its Profits” students have gained insights into how business and its context changes, and into some key abiding issues (e.g. the relationship of business responsibility to government, the purpose of business). Friedman packs an awful lot into the essay. Despite my belief that it is anachronistic and misguided in parts, Friedman – sometimes unwittingly – brings a few interesting surprises to the class.
Surprise No. 1is that it was even worth penning a critique of business social responsibility in 1970. It is sometimes assumed – especially in business schools – that business concerns with responsibility and sustainability are relatively new fads (the sad truth is that many schools have been slow to address these concerns). But, yes, there was a lot of talk about CSR in the late 1960s USA, and Friedman castigates GM Motors for its social initiatives. So CSR is not new but it has its ups and downs. Its focal issues, modes and rationales differ over time and vary among contexts.
The biggest change to CSR since 1970 is probably globalization bringing with it global supply chains and new corporate agendas of responsibility for labour & human rights and for the natural environment. Friedman envisaged that the only governments relevant for social issues were democratically accountable (i.e. American) and thus did not envisage the difficult responsibility issues for corporations in sourcing from, and selling to, countries which are undemocratically and corruptly governed.
Surprise No. 2is for those who know that Milton Friedman had already achieved fame or infamy for his libertarian position. In his book Capitalism and Freedom (1962), he presented government as inefficient and ineffective on key public policy issues. As Sandra Waddock points out, neo-liberalism, of which Friedman is a standard-bearer, generally contends that ‘less government is invariably good’. Yet in “The Social Responsibility of Business” Friedman is positive about government as an accountable and competent actor for resolving societal problems.
Friedman suggests a dichotomous view of the responsibilities of government and business because he assumed that business could best pursue its responsibilities – to increase profits – unencumbered by public policy obligations, and that government could legitimately raise taxes to address social issues. But this dichotomy rather belies the realities, then and now, of business organizations seeking favorable governmental intervention in markets and society… and of governments seeking business contributions to addressing societal challenges.
Surprise No. 3: Friedman acknowledges the virtue of social investments by business … ‘excuse me?’. Yes. In a rather over-looked passage, he comments that:
It may well be in the long-run interest of a corporation that is a major employer in a small community to devote resources to providing amenities to that community or to improving its government. That may make it easier to attract desirable employees …or have other worthwhile effects.
M. Friedman (1970). “The Social Responsibility of Business Is to Increase Its Profits”, p. 124 col. 3.
This looks like an early version of the business case for CSR – re-labeled Creating Shared Value by Porter & Kramer [2]? But Friedman just doesn’t want you to call social investments CSR. Like today’s critics of CSR, Friedman sees this cloaking of a business strategy as a form of “window-dressing” and as “approaching fraud”. This introduces the fascinating point of class discussion about whether something can be described as socially responsible if it also benefits the benefactor, and specifically the corporate benefactor?
Surprise No. 4 is for students of business and management. It lies in Friedman’s misrepresentation of corporate governance. His main argument about CSR constituting misuse or even theft of shareholders’ property is predicated on his contention that shareholders are the legal owners of publicly traded corporations. But in fact the corporation itself owns its assets: indeed the whole point about limited liability is that shareholders are exempted from liabilities that would otherwise rest on owners [3]. Of course, there are duties to shareholders – legal and ethical – but these are tempered in corporate governance regulation and judicial rulings (details vary among jurisdictions).
This is also a surprise for some corporate critics who see the problem of corporate irresponsibility as simply a function of a shareholder model [4]. In other words, they believe Friedman’s myth of the managers simply being the agents of shareholders. That this myth has achieved such standing is, perhaps partly testimony to the appeal that Friedman’s argument has had… and another reason why I like to introduce him to students.
Surprise No. 5 is one that, in retrospect, Friedman himself may have had to face. It is clear that investors do not conform to his fairly unidimensional assumptions of shareholders’ motivation: not all are interested in short-term profit. Some are motivated by long-term security of their investment and others by values (e.g. avoidance of risky products, preference for products not tested on animals). Today we see evidence of greater mainstreaming of investor concerns with sustainability issues that Friedman would have contended are beyond corporate responsibility and which are properly in the sphere of government (see Rasche blog).
Of course, much else has changed which students like to ponder, including:
the extent to which corporations adopt the business case for responsible and sustainable goods and services, be it for their own sake, or reflecting changing consumer, employee or investor preferences or, more broadly, reflecting their understanding of the expectations of societies and regulators.
the institutionalization of CSR through private authority (principles, standards, audits, reports) and its intersection with civil society and democratic government.
skepticism about corporate motivation for “promoting desirable social ends” is no longer the sole prerogative of libertarians like Friedman (and Hayek). I now also comes from the very socialist perspectives that Friedman feared the most.
So yes, we certainly need to move on, but we may move on more assuredly if part of our journey (on horseback or otherwise) is engaged in the conversation he spurred (sorry for flogging these equine metaphors…).
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.
“Sharing is Caring” is a way to manage post-COVID19 Economic Crises and Layoffs
By Anirudh Agrawal & Bharat Dhamani
10 of the 25 Linkedin review of best companies to work in India published in 2019 are firing their employees in 2020. They paid huge performance based salary to top management, who drove performance by reducing pay of the lower rung employees[1].
There is a moral dilemma when we compare top management compensation with those employed at the lower levels or those employed on temporary contracts in India Inc. The median top management salary in India is as much as 243 times than those at the lowest strata of the organisation [2]. During the recent Covid-19 crises, this wage asymmetry between the lowest rung employees and top management the resulting crises of legitimacy were further highlighted. This opinion piece discusses three strategies to control hockey stick pay-outs to the corporate leadership. Contrary to current narrative on free market and invisible hand, the corporate must self-reflect and implement policies for greater employee rights and dignity, collective bargaining and equality of pay to create sustainable competitive advantage.
India Inc. must learn from Scandinavian enterprises about their top leadership compensation model where the compensation is decided collectively ( along with the employee union), ensuring fairer pay and shared accountability towards organizational performance. Scandinavian strategy of collective bargaining has ensured multiple benefits [3].
It has ensured that the rights of the lowest-ranked individual is protected.
It has ensured that organizations follow sustainable policies both internally and externally, keep sharing the impact from shareholders to stakeholders, and
The employees at each level and the communities work in sync towards ensuring organisational mission and competitiveness politics, cliques and influence of personal interest groups are limited.
The collective agreements ensure that the employee flights to competitors are limited.
The effect of Scandinavian model has ensured an overall positive impact on organisational longevity, brand recall and competitiveness [4].
The India Inc should engage with their Indian public sector counterparts and learn their functioning and how they treat their employees through fairer pay and work conditions. India Inc should reflect and study the pay structure adopted by the Indian Public sector [5].
The public sector salaries have ensured respect for each, preservation of rights, longevity in the job and service to all irrespective of caste, colour or religion.
For example, the public sector banks like SBI ensure delivery of financial services to the poorest of the poor while ensuring that its banking officials are paid well. Our common sense would suggest that the Indian private sector to emulate some of the public sector compensation methodology, ensuring that the employee at the lowest strata get decent wages. The private sector can learn from the public sector on how to manage organisational compensation and increase organisational loyalty and in doing so, it must also increase benefits to the lowest ranking employee in the organisation. Similarly, the public sector should develop agility to reflect on market forces and learn to innovate to ensure that it is aligned and competitive as the competition demands.
Narayan Murthy of Infosys rightly questioned his senior management about the lack of accountability despite hockey stick payouts. He pointed out that shareholders might approve the actions of the top management but the corporate leadership must be accountable to the stakeholders that includes the public and the employees [6].
Therefore, top management compensation should be duly decided by following a strong corporate governance principles, transparency and by installing elements of corporate ombudsman.
Firms with strong accountability and stakeholder interests would perform better in the long run, than those firms which are driven by offering high incentives to top management for performance.
Some Indian private sector organisations belonging to distressed industries and markets had taken large public owned capital to run their businesses, paid hefty compensation to higher management but when things went wrong, both the promoters and top management had no public accountability. Besides, when the business failed to perform, the top management were just let go while the lower-ranked employees struggled to pay their bills. The audit reports were hardly made public and the accountability measures and corporate governance rules of such organisations were never questioned.
The organisations while deciding top management compensation must also bring proportionality in accountability and stakeholder engagement.
Collective bargaining, equality in paysimilar to public sector and corporate social and moral accountability are three strategies that the Indian corporations must reflect and incorporate in their managerial processes. Some of the NIFTY fifty Indian corporations like the Tata Group, Infosys, Mahindra and Mahindra, Hero Motors, ICICI Bank have implemented in their processes and one can see these effects on the employee satisfaction on Glassdoor employer ratings, brand recall by the consumers and overall stakeholder satisfaction is reflected positively.
Therefore, if the Indian private sector implements the policies that lead to greater accountability, equality in pay, collective decision making while ensuring its flexibility to market forces, we will see a disruptive and positive change in the image, governance mechanism, competitiveness and longevity of Indian corporations.
While the hockey stick model of compensation shifts the responsibility entirely on the top management, the collective bargaining and equitable compensation distributes the responsibility to each and every employee, bringing greater sense of employee engagement and employee accountability. Such a strategy has a potential to createlong term competitiveness and shareholder value.
Anirudh Agrawal is Impact Investing and Social Entrepreneurship Fellow at Copenhagen Business School and Lecturer of Entrepreneurship and Strategy at Department of Entrepreneurship at FLAME University India. He is researching on the institutional theory framework to reflect on debates in social entrepreneurship and social innovation.
Bharat Dhamani is a Lecturer of Entrepreneurship and Strategy at the Department of Entrepreneurship at FLAME University India. He practices engagement oriented learning through simulation and practical work. His subjects include financial management, business plan preparation, new venture business strategy and social entrepreneurship.
As the global Covid-19 pandemic spread through Europe and North America, companies raced to communicate how they were responding to the crisis. Advertising that focuses on a company’s response to humanitarian crises is hardly new. Every holiday season features a parade of brands touting their seasonal partnerships with charitable causes. Yet these exercises in “Covid-branding” struck a particular nerve with both consumers and media commentators because so many of the brands stuck to the same script. Quickly that script even became the subject of satire.
‘The hallmarks of the coronavirus ad are so consistent they could be generated by bots. They begin with eerie drone footage of empty streets, a shot of a child staring plaintively out the window and then — cue the upbeat musical key change — a medical worker peeling off a mask, a guy jamming on a home piano, maybe a deeply pregnant woman rubbing her belly as if summoning a genie from its bottle.’
Amanda Hess, The New York Times, May 22, 2020
These patterns are important. In the uncertain early weeks of the pandemic, as governments were still crafting their responses, the stories brands told played a role in shaping how the public made sense of the crisis. What kind of a crisis was it? What sort of solutions did it need? What role should business play in delivering them? Covid-branding offered answers to those questions.
In this briefing note, we present a preliminary analysis of Covid-branding by companies in Europe and North America during March and April 2020. Our analysis finds that messaging clustered clearly into two ways could engage: ‘Covid-helping’ and ‘Covid-coping.’ These messages of ‘managing the pandemic’ and ‘managing yourself’ frame the consumption of goods and services as a way that consumers can show they care, presenting shopping as a form of everyday heroism. In this way, they make the case that private sector has a role to play in humanitarian response.
Economic Context
The Covid-19 pandemic has taken an extraordinary toll on the global economy. Measures to combat the spread of the virus, including border closures, and national lockdowns affecting one-third of the world’s population, shut down much industrial production and pushed white-collar professionals to remote work. These measures, coupled with a fall in consumers’ own confidence in response to the health crisis, contributed to rising unemployment, falling consumer activity, and the worst global recession since the Great Depression.
This context, with consumer activity declining overall and shifting from closed stores to online retailers, placed pressure on brands to compete for a share of the smaller e-commerce pie. At the same time, the recession placed pressure on marketing professionals to demonstrate their relevance at a time of overall corporate retrenchment.
Marketing Context
We focus our analysis on online communications, especially social media output. Social media marketing is often informal in tone and crafted quickly to respond to real-time events, so that brands can ride the waves of attention paid to viral news stories, from royal babies to sporting events.4 Most research about this practice has suggested brands choose to focus on positive or neutral stories to avoid mistakes, as humorous tweets about a serious event can backfire. That makes Covid-branding in the early weeks of the pandemic, when infection and death rates were rising, unusual.
We also examine promotional emails and newsletters, a form of content marketing. Content marketers have begun to develop more journalistic skills, including as storytellers and explainers of complex phenomena, and indeed many former journalists are employed as content marketers. Covid-branding, in which brands help consumers make sense of the emerging crisis, is an example of this phenomenon.
These online forms have not received much attention from researchers of corporate humanitarianism, which has focused on more traditional forms of print and broadcast advertising. We hope that this brief typology of how marketers used these newer forms in the Covid-19 pandemic encourages further research into these formats.
Covid-branding as Covid-helping
Brands that emphasized their role in helping to manage the pandemic did so in distinct ways. To understand this, we considered two aspects of each marketing message: First, whether companies are making an engaged or disengaged intervention. Companies which are engaged use their own business capacities toward the Covid-19 cause. Second, we consider whether companies are claiming to directly or indirectly impact the Covid-19 crisis itself. We investigate whether the brand claims to address the medical situation (direct) or indirect societal outcomes of the pandemic, including economic impacts.
The four modes of engagement
Direct Engaged: Business puts its core capacities into directly fighting Covid
Some companies with core operations in the fields directly linked to fighting the pandemic (i.e. health care or logistics companies) quickly began communications around their role.
This Novo Nordisk Facebook advertisement shows healthcare workers holding up a sign reading “Thanks” in Danish. Novo Nordisk is a leading pharmaceutical company. Photographs of healthcare professionals at work in Novo Nordisk-made protective gear signaled company’s direct engagement.
Examples of countries where these products are in use underscores that the company serves a modern, global, and racially and gender-diverse group of professionals. Other direct engagement included shipping company Mærsk tweeting about “Mærsk Bridge,’ an air bridge and supply chain operation to transport PPE to healthcare workers.
Indirect Engaged: Business puts its core capacities into indirectly managing Covid
Since direct business engagement was only possible for companies whose core business was in medical or logistical operations, many companies emphasised managing indirect societal impacts of the pandemic in their early response.
As a food and drinks business with a national supply chain, Starbucks was able to use its core capacities to address indirect economic impact of pandemic on food supply. Promotional email highlights corporate donations of 700,000 meals to food banks and use of company logistics network to assist foodbanks with transport.
Makes the case that hunger “is part of the crisis” to underscore relevance of this indirect engagement.
Other indirect engagement included Draper James, the American actress Reese Witherspoon’s fashion brand, announced on its Instagram account on April 2, donations of dresses for teachers (deemed essential workers during pandemic); campaign backfired when dress supplies ran out.
Direct Disengaged: Business helps others directly fight Covid
Businesses who could not easily link their core operations to medical needs instead highlighted partnerships to help others managing the Cover crisis.
A promotional email from Camper highlights the use of 3D printers from its manufacturing operation to produce medical visors. The Email also highlights donations of shoes and slippers to staff and patients in hospitals.
Camper does not claim that they are themselves engaged in work to combat the medical crisis, but rather that they are making resources and equipment available to others who can do so.
Other direct disengaged examples included fashion brand Armedangels making cloth masks while explicitly stating on Facebook that they could not protect the wearer – “we can’t produce medical masks” – but that 2 euro from the sales of each mask would be donated to Doctors Without Borders, or gas company Crusoe Energy Systems announcing that they were donating computing power to Stanford University coronavirus research.
Indirect disengaged: Business helps others indirectly manage Covid
Businesses who could not easily link their core operations to urgent economic or societal needs instead highlighted partnerships to help others managing the impact of the Covid crisis.
Instagram post by crowd-funding platform GoFundMe promoting that its platform can be used by consumers to identify causes to support. Following the link to “learn more” shows company also offering free consulting to nonprofits on how to raise additional funds.
The company is not mobilizing its own resources to support Covid-related causes, but rather facilitating donations to other organizations through information sharing. Such consulting activity is not an ordinary part of the company’s core business.
Other indirect disengaged examples included Facebook offering grants for small businesses in the United States and using its network to promote the existing loan program from the US government.
Covid-branding as Covid-coping
Many brand engagements we examined did not make any claims to be helping combat the crisis, or its social impact, at all. Rather they focused on helping individual consumers to cope with the circumstances surrounding the crisis and its personal impact on themselves.
Because these “Covid-coping” messages focused on helping individuals, rather than society or the economy, our analysis focused on the demographics of what kind of consumers each type of “coping” message addressed, as well as what the messages said. We identified three coping mechanisms brands sold to consumers in these Covid-coping messages: coping-through-practicality, coping-through-pleasure and coping-through-denial.
1) Coping-through-practicality
Like indirect Covid-helping, it portrays shopping as way to address consequences of the pandemic, but instead of focusing on consequences for society, it targets how consumers can address their own needs.
An Instagram post by Zoku, a real estate company managing coworking spaces, offered private office rooms for professionals needing a socially distant office away from their household. Emphasis is put on a spare and clean layout of the office and “peace and quiet” for workers.
It suggests appeal to professionals with children struggling with disruption to work practices in shared family homes. Coping-through-practicality engagements largely addressed themselves to consumers in their identities as professionals and parents.
Other coping-through-practicality examples included laptop manufacturers advertising tools for working from home; home furnishings brands advertising tools for cooking at home; and phone, internet and electricity providers advertising their services as essential infrastructure for remote working and home-schooling. Marketing of this type emphasizes how brands could help families and businesses carry on “as normal” during a period of crisis.
2) Coping-through-pleasure
Exclusively comprised of brands in the fashion, fitness and lifestyle industries, with messages targeted to young and predominantly white women; present luxury goods as means of coping with pandemic through ‘self-care’.
A promotional newsletter for the “athleisure” brand Jolyn depicts a slim and muscular white woman on an inflatable pool float wearing sunglasses and painted toenails. Sunlight appears to reflect off the body of water in which she floats, with a caption advertising a “Bikini for staycation.” The Image and caption present the lockdown, which compelled individuals to stay home from their usual recreational activities, as a “staycation,” an unexpected source of free time at home.
Other coping-through-pleasure messages included advertisements from fashion brands including Anthropologie and Nicole Miller advertising loungewear as “self-care style” and clothing for “virtual dates or happy hours,” as well as make-up brands offering online tutorials for those with “more time (inside) on our hands.”
These messages present the health crisis as an opportunity for women to take a “break” from work outside the home and relax with home-bound versions of their usual recreational activities. They draw on influencer culture, which depicts recreation as a full-time occupation. Coping-through-pleasure offers the chance to purchase some of the influencer lifestyle, where the pandemic is not a stressor, and one can escape at a moment’s notice to a sunlit pool.
3) Coping-through-denial
Targeted widely to all consumers, these messages suggested that consumers shop as though the pandemic were not taking place, or advertised products which made light of the pandemic.
A full page newspaper advertisement in Corriere della Sera, Italy’s mostread newspaper, on 7 March, by two Italian ski resorts, Bormio and Livigno, captioned “Live the mountain with full lungs: There’s a snowy place where feeling great is contagious!”
At the time of advertisement running, lockdown was dissuading tourists from traveling to Italy, putting pressure on ski resorts, while deaths from the respiratory virus – which kills by targeting the lungs specifically – were at their highest in northern Italy, where ski resorts are concentrated.
Other coping-through-denial advertisements included Passports, a travel rewards program, contacting members in mid-March, when concerns about virus spread were focused on cruise ships, to advertise “the best pricing and exceptional bonuses” on celebrity cruises, and online retailers of topical and humorous T-shirts advertising limited range clothing with coronavirus-related captions. Notably, these engagements came broadly from the early weeks of our sample, and brands appeared to shy away from explicitly seeking to make light of the crisis or encouraging consumers to travel in spite of it, by the end of March 2020 when more severe lockdown and suppression measures were in place across Europe.
Implications for Brands
The different types of early Covid-branding in our sample, whether they focus on helping or coping with the pandemic, offer some cautionary lessons for brands.
About Commodifying Compassion
‘Commodifying Compassion: Implications of Turning People and Humanitarian Causes into Marketable Things’ is a research project focused on understanding how ‘helping’ has become a marketable commodity and how this impacts humanitarianism. An international team of researchers funded by the Danish Council for Independent Research (2017-2021), we examine ethical consumption intended to benefit humanitarian causes from the perspectives of consumers, businesses, NGOs and recipients. The research will produce a better understanding by humanitarian organizations and businesses leading to more ethical fundraising, donors weighing consumption-based models as part of more effective aid, and consumers making more informed choices about ‘helping’ by buying brand aid products. To learn more about our work, visit the website.
Maha Rafi Atalis a postdoctoral research fellow at the Copenhagen Business School, where her research focuses on corporate power, corporate social responsibility and corporate influence in the media. She is a co- Investigator on the Commodifying Compassion research project. http://www.maha-rafi-atal.com
Lisa Ann Richey is Professor of Globalization at the Copenhagen Business School. She works in the areas of international aid and humanitarian politics, the aid business and commodification of causes. She is the principal investigator on the Commodifying Compassion research project. https://www.lisaannrichey.com
Photo by Colton Vond, “Obey Consumerism,” March 3, 2019. Licensed under Creative Commons CC BY 2.0.
For too many firms corporate sustainability is itself not a sustainable endeavor
By Andreas Rasche
Corporate sustainability initiatives are blossoming around the world. While some firms have built robust infrastructures around their efforts, other firms struggle to do so, making their engagement a short-lived endeavor. In other words, corporate sustainability is itself often not sustainable enough to create lasting change in organizations. While there is hope that firms’ sustainability strategies are becoming more robust (e.g., because basic market conditions have shifted in favor of sustainability and make it difficult to ignore), there is still much work to be done to create sustainable corporate sustainability efforts.
The Challenge of Integration
One important barrier is the belief that “integrating” sustainability is more important than having an own dedicated organizational infrastructure around it. In 2019, the Danish multinational Maersk laid off a significant part of its sustainability team (including the head of the division). The aim of the reorganization was to merge its ongoing sustainability activities with work undertaken in other departments of the company. While integration may sound like a sound strategy and for many years consultants advised firms to make sure that sustainability work is not detached from the core of the firm, it also comes at a price:
In many firms, integration “waters down” sustainability efforts, makes them less visible in the organization and hence easy to neglect.
Don’t get me wrong: I am not arguing against integrating sustainability into organizations. I am arguing against using integration as a cover-up strategy to make sustainability efforts themselves less sustainable. Integration can easily be misused. Take the example of business education. For many years, business schools have struggled with finding the right balance between creating standalone courses on sustainability topics and integrating related content into the regular curriculum. Over time, integration proved to be difficult and only very few schools succeeded with truly embedding sustainability content across their curriculum. The main hurdle was to free up room in otherwise already packed courses and to also move beyond a symbolic adoption of sustainability content in classes.
Business schools’ experience holds a lesson for corporations. If you integrate, you need to ensure that wherever integration happens enough resources support the journey (e.g., time, knowledge but also interest). Often, this is where integration fails…
The Challenge of Corporate Size
Another barrier to making sustainability more sustainable is corporate size. Recently, I published a paper that analyzed which types of firms are delisted from the UN Global Compact (UNGC). We analyzed over 11,000 firms (both active and inactive participants in the UNGC). One key finding was that small and medium-sized enterprises (SMEs) were much more likely to leave the initiative than larger firms. It would be easy to conclude from this that SMEs are less sustainable than larger firms – but this would be the wrong conclusion.
What it shows is that SMEs struggle to develop lasting organizational structures around their sustainability efforts. UNGC delisting is based on firms’ failure to submit a mandatory annual implementation report. While larger firms usually do not struggle with such reporting, because this task is anchored somewhere in the organization, smaller firms find it more difficult to make reporting a lasting endeavor (e.g., because of resource constraints or lack of knowledge). Often, sustainability commitments by SMEs are based on internal champions who push relevant efforts and also sign the organization up to the initiatives like the UNGC. Once these people leave the organization or assume a different role within the firm, there are little formal structures that could fill the void that is left behind.
SMEs sustainability work is often more implicit and tied towards the communities they operate in. However, in a more transparent world where sustainability is increasingly datafied and benchmarked such implicit efforts may be easily confused with corporate sustainability lacking sustainable implementation.
Sustainable Corporate Sustainability
So, what is the bottom line? Making corporate sustainability itself more sustainable remains a key management challenge, both for larger and smaller firms. Creating durable organizational structures that can withstand the pressures of crisis situations and related cost-cutting efforts is one important way to address this challenge. Such structures have to be integrated with the rest of the organization to be not an add-on, but they also need to have a life on their own. What may even be more important is that corporate leaders and associated Boards need to develop an unambiguous vision for where the firm is supposed to go with its sustainability activities. This puts Board-level engagement with sustainability topics at the very top of the agenda, both for practitioners and academics.
Neoliberalism has a core and often repeated set of tenets or memes – the core building blocks of narratives and of culture (ideas, phrases, words, images, symbols). These well-rehearsed memes include that markets and trade are ‘free’, economic actors are self-interested profit maximizers, free markets will resolve societal problems, responsibility is individual, less government is invariably good, and continual economic growth through globalism is feasible and desirable.
Fundamentally, Friedman stated that the sole purpose of the firm is to maximize profits or shareholder wealth, despite that shareholders are, as Charles Handy long ago pointed out, hardly actual owners of the firm in any real sense.
This narrative completely overlooks both societal and ecological impacts of economic activity because nature is completely ignored, even assumed away.
As former UK Prime Minister once put it, ‘There is no such thing as society’. More to the point, Thatcher also stated, ‘There is no alternative’ to neoliberalism, a phrase that got shortened to TINA – still widely believed today.
There Really Are Alternatives!
Is there really no alternative? Particularly in the era of the Covid-19 pandemic, climate emergency, massive species extinction, and growth global inequality? In a recent paper ‘Reframing and Transforming Economics around Life’ I argued for just such an alternative, and also that economics that supports all of life needs to be the mainstream economic orthodoxy. It cannot be considered ‘heterodox’ or come with a modifier that sets it apart from the mainstream.
That means finding new memes as powerful and compelling as the neoliberal ones they need to replace.
Such thinking, while fundamentally based in economics, also needs to encompass core societal and ecological considerations to reframe how business is done and how economic activity in general is undertaken.
The paper synthesizes six new memes that frame an economics in support of all of life. It draws from a wide swath of economics and other literature (including now ‘heterodox economics’) and supports new approaches like Kate Raworth’s doughnut economics – with a few core memes. The six memes are briefly described below.
Six Core Memes for Economic Orthodoxy in Support of All of Life
The first new meme is stewardship of the whole, which means that all economic actors have a shared responsibility for the whole system (or nested set of subsystems) that their activities impact. This meme explicitly recognizes both the broader social – societal – system in which economic activity is embedded – and the natural environment in which societies are intimately, inextricably, and interdependently nested. The good of whole systems needs to be kept constantly in mind, whether that is the good of a whole company, a community, a nation, or the planet itself.
Another is Co-creating Collective Value. Here I draw from the pioneering work of Donaldson and Walsh, who stated the purpose of business as creating collective value absent dignity violations. The idea of co-creation invites collective participation in the production of value for the whole system – not just for one stakeholder but for the many that are affected by businesses and other economic actors. Multiple values and multiple stakeholders will inevitably mean new metrics by which to assess economic productivity and activity. Co-creating collective value brings back the original meaning of wealth, which has been corrupted to meaning only financial wealth, but which originally meant health, wellbeing, and prosperity.
A third relates to cosmopolitan-localist governance. The idea here is that though we live in a globalized world (and some things will remain globalized), many decisions – economic and other – need to be placed at the most local level feasible. That ensures access, voice, and participation by many more actors, and encourages sharing of ideas, knowledge, and other resources in contextually appropriate ways.
A fourth is that of regeneration, reciprocity, and circularity, which acknowledges the interconnectedness and interdependence of humans and nature, and that todays so-called take-make-waste production processes are no longer either truly efficient from a whole systems perspective. Regeneration means that production processes need to allow time for the Earth to regenerate resources that will be needed long into the future. Reciprocity means that trade and exchanges need to be mutually beneficial among other humans and with respect to nature. Circularity embodies the idea that ‘waste equals food’ as frequently expressed by the concept of circular economy.
The precept of relationship and connectedness places human economic and social activity into the full complexity and ‘wickedness’ of its connected and relational socio-ecological context. It recognizes that people are social creatures by nature, who only exist in the context of community. It acknowledges, as the African saying Ubuntu goes, ‘I am because we are’.
Finally, equitable markets and trade recognizes that markets exist and are important to meeting real (not manufactured) human needs, and that they need to be fair to all participants throughout the supply chain. That means that products and services need to be fully-costed and priced accordingly – and that all so called ‘externalities’ or negative by-products of production need to be incorporated into prices.
Though far more detail is provided in the actual paper, this brief outline synthesizes some of the core aspects of a framing for economics that has the potential to support all of life, rather than as is the case with neoliberalism, ignoring life and our Earth itself as a living system. It is past time for such a shift in thinking – and core memes – to take place. These ideas are offered as a tentative framework for beginning to reshape economic thinking in the direction of what works for all of life – wealth in its original meaning!
Sandra Waddock is the Galligan Chair of Strategy, Carroll School Scholar of Corporate Responsibility, and Professor of Management at the Carroll School of Management, Boston College, Chestnut Hill, MA USA. Her research interests include large system change; management education; cross sector collaboration; corporate responsibility; and social and organizational change.
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.
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.
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, 2008; Ardoin 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):
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.
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 acause-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.
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.
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.
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
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.
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.
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 a 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.
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.
At CBS we will host a workshop and two public events (see below for sign up) on corporate tax and inequality next week 24th – 26th June 2020 – the COVID-19 crisis hasunderlined the pertinence of this topic in major ways.
Taxation, tax havens and corporate tax have been high on the agenda for a while. Since the outbreak of the global financial crisis of 2008 corporations seeking to minimize their tax payments have been under close watch from the media, civil society and politicians with a focus on ensuring that corporations pay their “fair share”. The OECD and the EU have gone to quite some length to try to stop tax-optimizing behavior through revising and modernizing existing rules and legislation. In collaboration with the IMF and the World Bank they have invested time and resources in strengthening tax systems, governance and improving domestic resource mobilization in low- and middle- income countries. This work is ongoing and corporate taxation is already high on the list of priorities for the world community. But then along came COVID-19.
Taxation is central in two ways when we reflect on the pandemic and what will follow. Firstly, governments have passed historic economic recovery packages to ensure that the private sector stays afloat and to avoid mass lay-offs during the lockdown period in 2020. The question is what can we expect in return? Secondly, the emerging discussion on the disruption caused to national economies should be thought into long-term solutions for sustainability including tax.
“Tax haven free” recovery packages
Poland and Denmark, followed by Italy, Belgium and France have attached an explicit conditionality to their COVID-19 state support that companies cannot be registered in tax havens.
In light of this clear conditionality, there has been a media storm in Denmark, when a journalistic investigation revealed that several companies that government support had an ownership structure that was associated with tax havens and with a consumer outcry on social media. This prompted one of the companies, a well-known bakery “Lagkagehuset”, to take out full-page advertisements in daily newspapers to counter the criticism and explain the company structure. The CEO also did a lengthy interview on the issue of the company’s ownership structure to a major daily newspaper.
Two immediate takeaways can be drawn from this:
It has revived the discussion about the usefulness of tax haven blacklists (see more on this by CBS professor Leonard Seabrooke in Danish). Which countries should be on them, and what does it mean if you as a business (or individual) are associated with a tax-haven on such a list? One thing is clear, measures to push countries into greater cooperation will not in itself comprise a substitute for measures to make companies act responsibly.
It has emphasized the importance of corporate governance including a reflected approach to responsible corporate tax practice. The fact that there are so-called tax havens out there warrants companies and individuals to decide how or if they want to be associated with these. If yes, companies must accept that they may be liable to critique and journalistic and even political inquiry into what that association means. It should come as no surprise that association with these jurisdictions may entail suspicion.
Tax havens are not the only concern in relation to companies’ environmental, social and governance (ESG) behavior in this pandemic. The financial times reported how NGOs and investors are challenging shareholder primacy as it leads to growing inequality. Corporate governance and ESG, including tax, is now more than ever one to watch for companies that wish to be part of a sustainable business community in the short-term and the long-term.
Opportunities in the long term
Recovery packages are short-term measures. However, in the long term, the pandemic offers an opportunity that must not be missed in terms of taking a serious look at which direction our global society is heading.
While the pandemic, in theory, cannot tell the difference between the poor and the rich, it is clear that the existing inequality in our society is all made acutely visible during COVID-19. In the US more than 40 million have lost their jobs during the pandemic. In Sierra Leone, there is allegedly just 1 available ventilator in the entire country (for a population of 7 million, where Denmark has more than 1000 ventilators for a population of 5.8 million). As for the gendered impacts even for the better off, there are indications that women are less able to find time to prioritize research and publishing during the crisis than men are (). While big tech companies look to come out of this crisis more profitable and, possibly, powerful than ever.
These are just examples of how inequality is front and center in this crisis and how it offers an important opportunity to consider if the direction we are heading in is where we want to go.
With many countries having been in a complete] lockdown and economic activity at a standstill, this presents a unique opportunity to truly rethink how well the existing economy has worked for our societies and planet. The city of Amsterdam in the Netherlands has seized the opportunity to embrace the concept of the doughnut economy and the OECD is arguing that it makes discussions about challenges of digitalization of the economy and a minimum level of tax for MNEs more pertinent.
Tax is the central tool for governments to raise revenue and engage in redistribution. However, it is much more than a technical tool in an administrative toolbox.
It is the modern social contract for individuals and businesses as highlighted by the discipline of fiscal sociology. Short term, long term, whichever way, you approach it tax should, and will, play a central role in the debate about where we want to go from here towards a more sustainable, and more equal, future.
It provides a key source of revenue to finance vital public services, it can act as an explicit redistributive tool central to fighting inequality, and if used wisely, it can incentivize the behavior of corporations and individuals including the transition to more sustainable practices. Some of these things will be discussed at CBS in June.
A timely workshop on corporate tax and inequality
At CBS we are hosting a timely interdisciplinary workshop as a collaboration between the department for Management, Society and Communication, CBS center for sustainability, and the Inequality platform on corporate tax and inequality. We are bringing together researchers from around the world to meet (virtually) and discuss different pieces of research emerging on this relationship. We have legal analysis, economic modelling, qualitative analysis of tax administration efforts, and sociological analysis of tax professionals and wider societal tendencies on the agenda.
Our keynote speaker Professor Reuven Avi-Yonah will give a (virtual) public lecture (SIGN UP HERE) on Thursday 25th of June 2020 at 14:15 CET. He will speak to the short, medium and long term revenue options in light of the pandemic including a chance for a Q & A. He is a renowned scholar and has published widely on international tax, history of the corporate form, and CSR and tax among other topics.
The workshop concludes on June 26th 2020 with a (virtual) practitioner panel to discuss knowledge gaps (SIGN UP HERE) from the perspective of professionals of various disciplines. Bringing together professionals from media, NGOs, tax advisory services, tax administration and business. This is likely to be a lively debate with the aim of furthering the CBS tradition of engaging the private sector on what could be fruitful avenues for further research in this axis of relevance between tax and inequality.
About the author
Sara Jespersen is a PhD Fellow at Copenhagen Business School. Her research is on the emerging relationship between responsible business conduct and corporate tax planning of multinational enterprises. In a complex governance context, there are now signs of corporations’ self-regulation and the emergence of voluntary standards. Sara is interested in what this means for our understanding of corporations as political actors and the notion of political CSR.
Worldwide there is now a search for new ideas, business models, and innovations that can help us in rebounding from the global impact of COVID-19 and bring our planet and world onto a more sustainable future trajectory. One of the areas where this is evident is sustainability in global value chains where we have seen a global disruption of world trade in ways that have affected not only global brands but also suppliers and workers around the world. Some observers argue that this will result in a global backlash against attempts at making global value chains, for instance, the global garments and textile value chains, more sustainable. I.e. that COVID-19 will make brands and suppliers sacrifice long-term sustainability considerations at the expense of short-term business survival.
In my understanding,however, what these recent events demonstrate is not so much the need for new innovations and “thinking out of the box” but rather considering how the current organization of global value chains and thinking around sustainability have overlooked the importance of “supplier perspectives” on what social responsibility actually means in these chains. Amongst many practitioners, especially in the Nordic countries, there has been a tendency to assume that global brands’ adopting corporate codes of conduct and sustainability standards, asking value chain partners (i.e. suppliers) to implement these, and then auditing for compliance as well as helping suppliers to build capacity to enforce these guidelines would be sufficient.
The case of Bangladesh illustrates why this approach is insufficient. First, many brands have cancelled their orders with Bangladeshi garment suppliers, leaving local factories at the verge of bankruptcy, and hundreds of thousands, if not millions of workers at risk, potentially without any income to support themselves and their families. Second, even with orders that have been completed, some brands have refused to honor their contracts and either not paid for the goods received, substantially delayed payments, or asked for discounts on present or future orders from suppliers.
Globally, there has been condemnation of these “unfair” trading practices by both suppliers themselves (particularly in Bangladesh but also highlighted via social media) and also international labor advocacy organizations.
And third, the level of outrage is so strong that the Bangladesh Garment Manufacturers and Exporters Association has allegedly been considering placing a ban on particular brands so that they may not source garments from Bangladesh in the future as they have largely failed to live up to their “buyer” responsibilities towards suppliers and workers in Bangladesh.
To me, a key lesson learned from these events is that global brands, business associations, labor advocacy organizations, NGOs, researchers and students can no longer simply “overlook” supplier perspectives on social responsibility in global value chains.
The only realistic way forward is to take account of the concerns of these suppliers if global value chains are to be more resilient in the long run.
Many of these supplier concerns are already well-documented but tend to be either ignored or discarded by “global North stakeholders” in their policies, practices or discourses more broadly – for instance, in how they conceive and talk of sustainability in sustainability conferences around the world.
Just to recap some of the main points that we have learned from studies of supplier perspectives on social responsibility:
a) The factory manager dilemma – e.g., factory managers and owners – for instance, in the global garment industry – have had been asked for continuous price declines by many of their buyers while the same brands have asked for increased levels of social compliance at the same time.
b) The same dilemma arises when factory managers are asked to provide living wages around the year by their buyers when demand is seasonal and price competition is fierce in the global garment industry. For most suppliers having workers sitting around idle for part of the year is not a viable business option.
c) In addition, there is a general unwillingness amongst most (but not all brands) to co-finance – for instance, 50% – of the necessary social upgrading of factories in countries such as Bangladesh. Hence, brands tend to push “social responsibility” onto their suppliers rather than co-investing in and jointly bearing the costs of these improvements themselves.
d) Profits earned from selling goods sold to end consumers in the global North remain highly unequally shared amongst the (ironically called) value chain partners – often with suppliers winding up with 10-20 percent of the value of final retail price.
e) In addition to this, global North (read: Scandinavian) stakeholders including brands, government representatives, NGOs, students, and others often perceive “sustainability” in value chains as mainly relating to environmental and (to a lesser degree) social responsibility in the value chain. Hence, the general talk often seems to be about how suppliers should make environmental and social investments without considering the need for addressing existing inequalities – i.e. unequal distribution of value in these chains – and the business aspects of running supplier operations. In fact, for many suppliers in countries such as India, Pakistan and Bangladesh, sustainability is first and foremost related to “economic” or “financial” sustainability. Only when suppliers are profit-making can they afford to invest in social and environmental improvements. This is not exactly rocket-science but a point that often seems to be completely overlooked by Scandinavian “sustainability” advocates.
f) Finally, what is sometimes considered “social responsibility in global value chains” in the global North might be narrowly defined as the payment of minimum wages, overtime payment, social insurance, and the implementation of occupational health and safety measures in supplier factories. Of course, I am all for supplier factories implementing these measures. However, I also sympathize with many suppliers, NGOs and other stakeholders in the global South that point to other aspects of social responsibility that may be more contextualized.
For instance, in South Asia, many studies have pointed to factory managers helping to finance the education/school fees of the children of some of their workers. Financing the weddings of young workers or the weddings of the sons/daughters of their workers is another sign of social responsibility amongst many factory owners in South Asia.
From a Scandinavian perspective, this may not be related to “social responsibility”.
However, in the sub-continent, where your wedding day is often considered the most important day in your life, and very important for your family’s wider social standing in society, employers’ financial support may be seen a very valid act of practicing “social responsibility”.
Providing tea to your workers may also be
considered an act of “social responsibility”. Again – from a Scandinavian
perspective – this may not be considered a big act of social responsibility.
However, then again, is it really that difficult to understand? How many of us
in Scandinavia do not value it when our own employers provide us with free tea
or coffee? It gives us the opportunity to socialize with our colleagues or take
a much needed break between different work tasks. Why should it be any different
in countries such as India and Pakistan where tea drinking could almost be
considered a national sport?
Moreover, some factory managers in South Asia allow especially young mothers or women with even slightly older children the option of either working part-time (when the kids are in school or someone else is at home to take care of them) or engaging in home-working so that they may look after their kids while engaging in for instance (embroidery) whenever there is a free moment. Of course, I do recognize that home-working is also often associated with receiving very low wages and not having any social insurance.
However, during COVID 19, even in the Scandinavian context, homeworking has become an absolutely essential part of keeping private companies and public institutions afloat crisis under such compelling circumstances. It has also involved many challenges for families with young children who had to engage in home-based work (typically computer-based) and taking care of their children simultaneously.
Yet if homeworking is indeed not only allowed but also encouraged by most employers in Scandinavia, why it is that brands in the global North sometimes impose an outright ban on their suppliers outsourcing particular work tasks to “home-based locations”?
No wonder that many factory owners and managers in the global South believe that global brands practice double standards when it comes to their social responsibility requirements (i.e. ‘do as I say but not as I do’).
In conclusion, there seems to a great need in Scandinavia for raising our own levels of awareness about the commercial challenges faced by suppliers and acknowledge the myriad ways in which “social responsibility” may be thought of and practiced – of course, without throwing out the baby with the bathwater. Compliance with core labor standards remains a key concern, but it is not the only way of conceiving of supplier responsibility in global value chains.
About the author
Peter Lund-Thomsen is Professor at the Department of Management, Society and Communication at Copenhagen Business School. His research focuses on sustainable value chains, industrial clusters, and corporate social responsibility with a regional focus on South Asia.
More about Covid-19 pandemic on Business of Society blog:
What do fresh air, canaries, and research all have in common? Academics often humbly conduct and publish research, hoping but not knowing if it had any impact on society (we hope very strongly!). This becomes even more bewildering when it comes to the advent of research impact metrics, such as with the UK’s Research Excellence Framework (REF) (UKRI, 2020). It is a rare and wonderful occasion in which one can not only bear witness to impact but actually physically touch it. As an industrial researcher with CBS and the VELUX Group, I am often moving between theory and practice, but the tale of an innovation process stands out. This impact story is the story of how research became related — albeit several steps removed — to the development of an innovative product, AirBird®, co-created by GXN, the VELUX Group, and Leapcraft. Moreover, it is the story of inspiration in practice, a breath of fresh air in the academic realm.
The academic story starts with a group of nine researchers. The ‘Smart Buildings and Cities’ research group is composed of nine industrial PhDs and postdocs employed in diverse Danish organizations and universities, housed in the BLOXHUB Science Forum and supported by Realdania and the Danish Innovation Fund. Some of us are social scientists engaging with engineering (that would be me), some are architects engaging with computer science, and yet others are engineers conducting social research. I’ve never seen such a mad mess of transdisciplinarity, and it’s beautiful (and also very much guided by our Science Forum coordinator, Pernille Berg).
The innovation process parallels the fourth research case I have been building to better understand and theorize business model innovation for smart technology in the building industry. This case concerns indoor climate data-driven building renovations as a potential business model and involves collaboration among CBS and the VELUX Group (the research), Kokkedal Skole (the building), and Leapcraft (the technology). Fredensborg Kommune has allotted nearly 1 billion DKK (120 million euro) to the improvement of its schools in a program called ‘Fremtidens Folkeskoler’ (Primary Schools of the Future); and it is kicking off the program with an investment of over 35 million DKK (4 million euro) in renovations at Kokkedal Skole. Prior to renovations, we needed to answer the questions: How is the building being used now? What is the indoor climate like? How do teachers and students interact with space? And then we can compare the data post-renovation. This kind of research, as it turns out, is especially timely, given the Danish government’s commitment of 30 billion DKK for sustainable housing renovations.
Kokkedal Skole Image by Lara Anne Hale
The Kokkedal Skole project is a fascinating one to discuss with others, given the visionary leadership of their principal Kirsten Birkving and excellent building management of their facilities manager Lars Høgh-Hansen. They have in fact been featured on CNN Business for bringing new technology into the classroom, namely Leapcraft’s AmbiNode sensors and SenseMaking tool, the latter having been developed by VELUX based on the Green Solutions House project. Two of the Science Forum group’s companies, GXN and the VELUX Group, started to take discussions at length about the emerging findings on health in buildings, the invisibility of indoor climate, and the need for a simple alert when the situation is dangerous. They posed the question, is it possible to make an indoor health equivalent of the canary in the coal mine, who would start tweeting to coal miners when in contact with dangerous air?
Early in 2019 these talks came to fruition when Realdania invited applications for seed funding to research group members interested in collaborative innovation. This led to the Smith Innovation-coordinated workshop “The Canary in the Goalmine” with the VELUX Group and GXN working on the goal of defining how the ‘canary’ would look like, and – based on the research at Kokkedal Skole and renovation challenges presented by the Student and Innovation House – how it would function. A year later, I am working with VELUX and Leapcraft to finalize the one-year monitoring report from Kokkedal Skole, and AirBird® is ready to hit the shelves. The concept is simple and beautiful, just like the bird: when the CO2 levels indicate unhealthy air, AirBird sings a bird song to let its users know they should bring in some fresh air; which TV2 Lorry featured at Kokkedal Skole on the 25th of May. The AirBird® has been ideated, designed and developed in co-creation between GXN, VELUX Group and Leapcraft.
Airbird introduction Image by Lara Anne Hale
Although the development of AirBird® does not tell the story of sustainability dynamics within innovation ecosystems (Oskam et al., 2020), nor the story of smart technology-facilitated business models for health and well being (Laya et al., 2018) – two examples of academic work that resonate with my research – it does challenge the idea that business model innovation precedes product innovation. Nudging tools like AirBird® may stimulate awareness and behavioural changes that anticipate business opportunities for a healthy indoor climate. Further, serendipitous product innovations may serve as artifacts embodying value negotiation, the foundations of business model innovation.
But ultimately, the AirBird® story is attractive because it presents impact that is tangible. And whereas the physical product is the most tangible of all, this innovation has had other impacts as well: collaborative innovation experience among the organizations involved; encouragement within the Science Forum of the value of transdisciplinary research; and the need to face directly the tensions between the academic and practice worlds. For my part, it’s uncomfortably different from the impact implied in academic publications and absolutely refreshing — something fresh air, canaries, and research should all have in common.
References
Laya, A., Markendahl, J., & Lundberg, S.
(2018). Network-centric business models for health, social care and wellbeing
solutions in the internet of things. Scandinavian Journal of Management,
34(2), 103–116.
Oskam, I., Bossink, B., & de Man, A.-P.
(2020). Valuing Value in Innovation Ecosystems: How Cross-Sector Actors
Overcome Tensions in Collaborative Sustainable Business Model Development. Business
& Society, 000765032090714.
Rafaeli, Anat, & Pratt, Michael G. (2006).
Artifacts and Organizations: Beyond Mere Symbolism. Mahwah: Lawrence
Erlbaum Associates Inc,US.
Lara Anne Hale – Ph.D., M.Sc., Assistant Professor, Industrial Postdoc Fellow with CBS and VELUX. Lara conducts transdisciplinary research on sustainability in the built environment, including aspects of digital transformations, circularity, user-centered design, and systems thinking. Her current project focuses on business model innovation for smart buildings in the BLOXHUB Science Forum ‘Smart Buildings & Cities’ research group, supported by the Danish Innovation Fund and Realdania.
One thing seems to be clear by now – that we are all challenged by the effects of the Covid-19 pandemic. This includes all enterprises, large as well as small firms. As states and individuals, also SMEs (Small and Medium-size Enterprises) need to figure out how to respond. SMEs constitute the vast majority of enterprises on the Globe, and their response to the current situation, including how they behave in terms of social responsibilities matter a lot. If jobs disappear, or wages are lowered and/or working conditions deteriorate, a large number of persons (employees) and families will be negatively affected. If environmental standards are lowered the nature and humans will be negatively affected.
The perception of what constitutes social responsibilities varies substantially across countries. As SMEs in different parts of the world face very different situations (see Spence et al. 2018), also in times of Covid-19, the responses will be very different. We already witness intense debates on what is the ‘appropriate way’ of reacting. Most SMEs have a less formalized way of operating compared to larger firms. While this is viewed as leading to being less socially responsible compared to large firms this type of organizing – not being so standardized – maybe be is an advantage in an unknown situation like the one that we are witnessing right now. Agility, creativity and ability to make a decision fast could be an advantage right now like the Danish small firms that have adjusted their production to include critical health products show.
However, the examples are probably the exceptions rather than the rule as only a smaller section of the SMEs typically can be characterized like this. The majority of the SMEs are operating in more traditional, standardized ways and have a more limited range of responses as things stand right now.
In our part of the world, governments have implemented numerous support schemes trying to assist the private sector, including SMEs, in various ways. The Danish SME has various public-funded support packages and a highly formalized labour market cushioned by a number of social benefit programs to factor into the considerations. Hence, we can insist that an important part of managing continues to be keeping an eye on working conditions and the environmental impact. In other parts of the world like the developing countries, governments have so far done less and given the much more informal nature of the economies, SMEs are much harder effected.
The Ugandan SME is faced with no economic assistance and a complete lockdown of the society leading to a dramatically reduced – if not totally halted – operation and turnover. In addition, no social benefits exist to assist employees who are losing their job. So, the overarching topic concerns the socio-economic dimensions of how many SMEs that survive while retaining a good number of the staff – or on the more pessimistic side – how many that go down leaving scores of people unemployed and without an income affecting individuals as well as tons of families.
What can we then expect in terms of social responsibilities in such a situation? Given that some developing country SMEs are characterized as having ‘family-like culture’, we would expect such enterprises to retain the employees (Tran and Jeppesen, 2016). Even though the SMEs retain the employees, owners and managers personally have to handle the insecurity that accompanies the situation as well as relating to the concerns among the employees.
The family-like type of organization could ensure that employees are kept and not fired. Still, we know that a number of SMEs pay little if any wages in times of limited production. Hence, having a job with no income does not make a difference right now.
Small enterprises in developing countries are also praised for their community engagement in taking up activities ensuring women (Langevang et al, 2015) or young people income. The localized response may assist in various ways of helping citizens in dire need. Religion and which church that you are a member of play a role. Some churches, as well as the wealthier members (and among these SME owners and managers), come forward to assist their congregation and the less well-off families in times of need.
We need to wait for the answer to whether and to what extent Covid-19 will be marked by resilience and a protective and more caring (social) response by SMEs – or rather by the tough reality of downsizing and/or closing down with numerous dire consequences.
Søren Jeppesen is Associate Professor at the Department of Management, Society and Communication at Copenhagen Business School. His research concerns the development of firms in developing countries. He focuses on SMEs, CSR and driving forces (or lack of same) for strategies of SMEs in developing countries in engaging in CSR (or not engaging).
More about coronavirus pandemic on Business of Society blog:
In the fall of 2019, there was a flurry of news stories in the British media about political events in western Kenya which, according to one article, threatened the future of the nation’s beloved cup of tea. In Kericho, the heart of Kenya’s tea-growing country, the local community are reclaiming vast tracts of land obtained under British colonialism for the large-scale cultivation of tea. Faced with a land shortage that hinders possibilities for sustainable development, local activists are challenging the extensive land acquisitions that took place under colonial rule, many of which constitute the premises of multinational agri-business today. CSR initiatives and the sustainability standards that are increasingly ubiquitous in Kenya’s tea industry fail to address or acknowledge a sustainability issue that is of major concern to local communities on the ground: land.
During the early 20th century, while trying to create an export economy in eastern Africa, the British government identified the highlands of Kericho in Kenya’s fertile Rift Valley as a place of high agricultural potential and gave out land to European settlers. The area was identified as an ideal place for growing tea, a commodity that was already thriving elsewhere in the British Empire. With the entry of two major companies engaged in tea production in India and Sri Lanka, further land allocations were made, providing the premises for the expansive tea plantations that dominate Kericho’s landscape today.
Colonial laws enabled these land allocations: the British government could acquire land and relocate the ‘natives’ who were occupying and cultivating it. The Kipsigis community living in the Kericho area lost large amounts of land, only to be compensated with smaller areas of less agriculturally conducive land in designated ‘native reserves’. Others remained in their home areas but were rendered ‘squatters’ required to work for settlers in return for their continued occupation.
Many today struggle to make a living from diminishing farms in the former native reserve areas as family land is subdivided among children, while others remain landless or forced to purchase land at high prices. Land shortage poses a direct challenge to sustainable livelihoods in Kericho.
These grievances are what the Kericho County Governor seeks to address. Identifying as a victim of historical land injustices himself whose ancestral land lies within the vast tea plantation owned by the multinational giant Unilever, he advocates for reparations that acknowledge the forceful acquisition of his community’s land. This implicates multinational tea companies directly. For the Governor and Kipsigis community activists campaigning for justice, these companies are operating on stolen property that rightfully belongs to the community.
Tea plantations employ large numbers of locals in roles that range from tea plucking to top management and offer opportunities and bursaries for adult and child education. While much of the British media coverage of Kericho’s land politics, including an article in The Economist, has envisaged Zimbabwe-like evictions of British companies in Kenya, the Kericho Governor made clear when I met with him earlier this year that it is not in anybody’s interests for the tea companies to hand over the land and leave.
Rather, following recommendations made by Kenya’s National Land Commission, the Governor asks that tea companies apply to the county government for new land leases, following which the land can be resurveyed. Undeclared acreage, he argues, should then be reverted back to the county government. In addition, the Governor seeks to increase land rent so that the county government is more adequately remunerated for the land.
This, along with demanding mesne profits from multinationals for the use of the land since 1902, is intended to enable more equitable redistribution of the wealth generated from large-scale tea production.
One Kipsigis community activist whom I met envisaged a new model of business: a continuation of plantations’ management and operations, but with the local community, the ‘rightful landowners’, as the major shareholders. This is not to say that all of these proposals are wholly feasible or realistic for tea companies, but to envisage other ways of doing business whereby local communities and authorities are rendered more equal partners.
This goes beyond CSR initiatives which, while valued in Kericho, can be seen as a continuation of colonial paternalism rather than rethinking the very premises of companies’ local engagement. It also goes beyond the certified sustainability standards provided by organisations such as the Rainforest Alliance and Fair Trade that seek to ensure economic, environmental and social sustainability in the tea supply chain yet are generic, driven more by the demands of distant buyers in Europe and North America than those of local communities on the ground.
Undoubtedly, community land claims in Kericho are entangled in local politics. The Kericho Governor’s campaigns are part of a populist political strategy that has seen him win two terms in office. Furthermore, judging by Kenya’s postcolonial history, there is no guarantee that relinquished land or funds would be equitably rolled out to the community should he succeed. Another caveat relates to major challenges facing the tea business in recent years with regard to profitability: at the time of my fieldwork earlier this year, the price of tea hit an all-time low.
The coronavirus pandemic will surely further threaten the industry. In this context, local political challenges of the kind we see in Kericho might push companies to reconsider their operations entirely.
However, this shouldn’t preclude reimagining the terms of companies’ engagement, not only in Kenya but across Britain’s former settler economies. If large-scale agri-business is to face up to the challenges of sustainability in the places it operates, it must acknowledge the historical grievances attached to the ground beneath it and engage with local communities beyond the confines of CSR and sustainability standards.
About the Author
Hannah Elliott is a Postdoctoral Research Fellow at CBS’ Department of Management, Society and Communication. Her research on the SUSTEIN project critically examines the production of certified sustainable Kenyan tea.
The current pandemic has exposed blatant social injustices and inequalities around the world, prompting businesses to face their societal impact. Before the crisis, however, a rising wave of employee activism had already started to call into question the extent to which companies had managed to meet their moral obligations. Employees at Wayfair, Microsoft, Google, Twitter and Amazon have protested against their employers’ stance on issues ranging from climate change to migration, pushing them to deliver on public commitments or refusing to contribute to morally dubious projects, such as Amazon’s facial recognition software that had potential to contribute to racial discrimination.
As the crisis has provided ample opportunities to reflect on and reconsider the role of business in society, we believe that this is the time to learn from employee activism – and to learn to embrace it as a force for change.
The problem
with CSR
Virtually all companies today pursue a CSR agenda, strengthened by the global agreement around Sustainable Development Goals (SDGs), the growing power of corporate sustainability rankings, standardization of sustainability reporting and the proliferation of consultancies who offer support to companies pursuing a shared value approach to social responsibility. Aligning business and societal value creation, such approaches promise win-win solutions in addressing social ills. Yet it is the very promise of win-win solutions that undermines critical engagement with companies’ roles in creating or reproducing social ills.
First, CSR has become the corporate worlds’ dominant paradigm for change that is positive and comfortable. If CSR managers want to avoid eyerolls, especially from top managers and shareholders, they need to speak the language of profit and present a measurable business case for addressing social ills. By enabling companies to do well by doing and looking good, however, CSR may also cultivate complacency. This does not mean that CSR has failed to encourage companies to embrace more responsible business conduct. But it is a potent substitute for engaging with the many uncomfortable social problems as to which companies have hitherto failed to do the right thing.
Second, the triumph of CSR is symptomatic of and reproduces socialinequalities. CSR is driven by privileged employees and managers often based in the corporate headquarters – members of the organizational elites. The voices of others in the company, as well as the people affected by corporate activities, are seldomly included. Indeed, Kaplan (2020) suggests that the business case alienates employees and does not deliver on promises to stakeholders. Misguided CSR initiatives can actually make things worse for those they aim to help. By limiting attention to win-win solutions, CSR has failed to pay attention to those who lose.
How can employee activism help?
Activist employees are those employees that care about and actively promote social justice in their company. With this, we call upon companies to stop viewing employee activists as antagonists or nuisance and instead invite activism in order to face problems head on. Specifically, we suggest that companies should consider the following:
1 ) Accept activist employees rather than “handle” their dissent.
Activist employees bring to the front the less comfortable social problems that a company creates, reproduces, or in other ways is complicit in. Commonly, companies manage dissent by firing those employees who speak out against corporate misdeeds. Activist employees’ voices may be uncomfortable, but if fired, they will certainly still be heard – if not by management, then certainly by the public.
2 ) Listen to dissenting voices and engage with uncomfortable truths.
Employee activists can help by shedding light onto just such areas where businesses may have missed the mark. Representing social movements inside the company, they generate awareness of problems it may have missed or not taken seriously and even contribute to solutions. Most importantly, the break with the complacency of corporate CSR practice and drive the more radical change that is so badly needed.
3 ) Confront privilege and listen to employee activists
Companies should be mindful of who gets to have a say in the issues that matter. It is easy to overlook issues voiced by activists on the ground – across the operations and especially in distant local offices. Yet they are often the ones with a first-hand understanding of social ills as well as externalities produced by the company.
4 ) Tackle social injustices within.
Not all employee activism is driven by
personal values and compassion for others: alongside staff walkouts for greener
business at Google and Amazon, Google’s temporary workers and Amazon’s
warehouse employees fight for fair labour conditions. In tackling social ills,
companies should never overlook the struggles of their own employees.
CSR is still needed, but we can do even better. What we are proposing is inconvenient, disturbing, and uncomfortable, but it’s time for companies to get things right.
Our critique of CSR is inspired by the following contributions:
Schneider, A.
(2019). Bound to Fail? Exploring the Systemic Pathologies of CSR and Their
Implications for CSR Research. Business & Society, in press.
About the Authors
Luda Svystunova is a Lecturer in International Management at the Institute for International Management, Loughborough University London. Luda’s research examines multinational firms’ interactions with their non-market context through corporate social responsibility and corporate political activity, particularly in non-Western settings. She is also interested in the role individuals within and outside companies play in these interactions. Luda’s Twitter: @LudaSV.
Verena Girschik is Assistant Professor of CSR, Communication, and Organization at the Department of Management, Society and Communication, Copenhagen Business School. Verena’s research focuses on the responsibilities of companies in the contexts of complex societal problems and humanitarian crises. Interested in relations between companies, governments, NGOs, and other societal actors, her research explores how companies negotiate their roles and responsibilities, how they perform them, and to what consequences. Verena’s Twitter: @verenaCPH
Writing about anything in relation to Covid-19 is rather hopeless. Any attempt to describe current developments has a half-time of 30 minutes. Any attempt to speculate what lies ahead drowns in the flood of near infinite plausible trajectories. And any and every attempt usually ends up with the hammer and nail problem, resulting in the author pushing his favorite pre-existing policy to ask as an essential ingredient in the crisis response, much as the whole world looks like nails when you hold the proverbial hammer in your hand.
Nevertheless here a foolish attempt to jot down some small observations of how the Covid situation is currently influencing how businesses lobby government, or in jargon corporate political activity. In a nutshell: there are indications that there is more, that it is more conventional and that integrity in lobbying is more in demand than ever. In detail:
1)A lot to win and a lot loose means a lot to do or: “Everybody is upside down. All the clients are upside down” (US lobbyist)
Lobbying is typically understood as anti-cyclical as it tends to experience an uptick in economic downturns. Yet this time is a difference in scale and a difference in kind. Covid-19 is an essential threat to a vast array of industries and companies that until a few weeks ago looked very solid. At the same time, the scale of financial support and transformational depth of regulatory responses that are being considered and dispersed are absolutely unprecedented in the post WW2 era.
Existential stakes convert into a sharp increase in lobbying. Recent data shows that lobbying spending in the US has climbed to near-record levels already and the centrepiece of legislation, the Coronavirus Aid, Relief and Economic Security Act is the second most lobbied upon a piece of legislation.
There are new clients – that also fuel the lobbying boom – three quarters of lobbying filings in the US that mention COVID issues are by new principals. And there is a flourishing new service line out there helping companies shape new rule-writing and expedite approval for their anti-corona products. Many are desperate, everyone is out to get a piece of the cake and as even the most adept watchdogs have a hard time with tracking all proposed rule-changes and handouts it may also be a good time to slip in this long-coveted, yet unrelated regulatory tweak in one’s own favour that otherwise might have not withstood public scrutiny.
2) Forward to the basics tools, tactics and incumbents.
It seems likely and there are indications that corporate political activity is for the time being concentrating on tried and tested tools and relations. First, the Covid-19 response is the hour of the executive as the first phases of the policy response are firmly driven by the executive in most countries around the world. Emergency powers are being invoked, far-reaching policies are hastily cobbled together in small committee, and implemented qua executive orders. Ex-ante legislative deliberation is compressed, public consultations are limited and judicial reviews are only slowly kicking into gear. All this means that lobbying is currently heavily focused pragmatically on very tangible outcomes and the executive branch of government as for example, a top German lobbyist has described in a recent interview.
Expected budget cuts and trimmed client accounts for public relation agencies in the first-affected Asia-Pacific also suggest that more sophisticated upstream strategies for framing and influencing public debates in the longer run are being put on the backburner and efforts are shifting towards core government relations work. Add to this that social distancing measures and going virtual makes it difficult to cultivate new relationships. As a result, existing, networks and long-time friends who may have walked through the revolving door between public office and private practice carry the day dealing substantive incumbency advantages to the already well-connected and established players both in terms of in-house lobbying departments and hired firms.
3) An incipient debate about the fundamentals close to home – and high stakes for integrity
Financial distress and zero-sum dynamics in what are ultimately finite support programs demand maximum resolve when making one’s case to the government. Many more interests than usually have come to the fore to compete for the pie and some of these competitors can be expected to act very opportunistically. All this puts enormous stress on integrity in lobbying. But this comes at a time when the integrity of the corporate political activity is perhaps more important than ever.
Policy-makers enter into uncharted territory with many of their interventions and stabilization efforts. Peak uncertainty means they need accurate information on the situation of different interests and stakeholder groups and how they may be affected by different policy options. Policy-makers need more of this information more urgently than ever. Extreme fragility means that the consequences of mis-judgments are substantive.
All this highlights how important the honest, proportionate, evidence-supported articulation of interests and concerns to government is at this moment in time. In the eye of the public business appears to be largely failing in this area. Less than 40% of respondents in a very recent 11-country survey – the spring update to the 2020 Edelman Trust Barometer – perceived business to be a reliable source of useful and accurate information during the pandemic, a number that dropped to even more staggering lows of 24% and 15% in France and Japan respectively.
Yet, the relevance of credibly upholding integrity in lobbying goes even deeper. The specter of special interests hijacking the Covid response looms large as a tremendous PR nightmare. Such a storyline is ready to combine with the bitter aftertaste of the last financial crisis response that many perceived to be undermined by strong industry lobbying. The prospects of a special deal for special interests could thus further inflame the very anti-business sentiments that are already on the rise: in the same survey as referenced above respondents put business CEOs last when thinking which types of professions and leaders do a good job in meeting the demands the pandemic puts on them, while only 38% thought business did a good job in putting people before profits.
Pushing public opinion that is already at the edge further into the negative territory through reckless corporate political activity looks like a bad idea even from a narrow tactical perspective. This is because another fallout from Covid is an emerging public debate about the basic bargain between business and the public and the increasing readiness to consider options for a fairer settlement that until recently seemed to have difficult to find acceptance in the mainstream.
The 11-country Edelman survey again captures some of these sentiments: a remarkable 64% of people agreed with this statement:
“This pandemic has made me realize how big the gap in this country is between the rich and the working class, and that something must be done to more fairly distribute our country’s wealth and prosperity”
Massive public financial support is a great lever for updating the social licence to operate for the corporate world. This is not a theoretical possibility but has already become a reality. Widely discussed provisions to bar companies that engage in overly aggressive tax planning or pay out dividends in times of crisis from benefiting from post-Covid support is one example. So is the observation that a debate about the legitimacy of share buy-backs that despite its policy relevance was more or less confined to the fringe of experts and specialized advocates all of a sudden features prominently in the policy mainstream. It has even prompted the European Commission to require a ban on share buybacks as a central condition when government prop up companies by acquiring equity ownership.
This public limelight for a seemingly arcane issue is well deserved considering that for example the top airlines in the US that are currently clamoring for public support are estimated to have spent 96% of their free cash flow during the last decade on share buybacks and built no meaningful reserves to weather a major crisis, a strategy termed by a banker from a top firm as “a staple arrow in the quiver of companies… to optimize how they drive the most value for their shareholders”. From a corporate lobbying view not particularly productive narratives to feed any more.
Many, including this author, view this as a much needed and welcome conversation about how to refresh the principal compact between business and society in view of sharing the benefits and costs from business activity fairly and within planetary boundaries. Business will not do itself a favor when flexing its lobbying muscle too hard for special treatment at this point in time when the public is increasingly prepared to doubt and revisit the basic tenets of this compact.
Responsible corporate activity, transparent, well-governed and aligned with purpose, planetary boundaries and broader regards for all stakeholders is not a nice add on for good times. It is essential to protect the public trust in functioning institutions, functioning crisis response and a functioning societal bargain with business. This is not the time to call in special favours and push a narrow agenda. This is the time to do act as a responsible corporate citizen on all fronts and particularly when it comes to government engagement.
Now there it is: my policy agenda framed as essential in Covid times. The whole world looks like nails when you have a hammer in the hand. But in this instance, of course, it is for real.
About the author
Dieter Zinnbauer is a Marie-Skłodowska-Curie Fellow at CBS’ Department of Management, Society and Communication. His CBS research focuses on business as political actor in the context of big data, populism and “corporate purpose fatigue”.
