Institutions matter: The importance of institutional quality when embedding sustainability within the capitalistic realm

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 

  1. Institutional Quality, calculated through a factor analysis and based on the World Governance Indicators from the World Bank and 
  2. 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.


Photo credit: Galeanu Mihai on iStock

Sustainability enabler or complexity blinder?

By Milena Karen Bär & Dr. Kristjan Jespersen

◦ 5 min read 

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.


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EU proposal on Corporate Sustainability Due Diligence for human rights and the environment

Advancing responsible business conduct, but failing to consider key functional challenges for remedy

By Karin Buhmann

◦ 9 min read 

Why is the proposal important?

The EU Commission’s draft Directive on mandatory ‘corporate sustainability due diligence’  published in the end of February is already recognized to have the potential to become a game changer for responsible business conduct (RBC) in Europe and beyond. If adopted, the proposed Directive will turn international soft law recommendations for companies to exercise risk-based due diligence in order to identify and manage their harmful impacts on human rights and the environment into hard EU law and therefore binding obligations for companies. Companies will be required to exercise due diligence with regard to actual and potential human rights adverse impacts and environmental adverse impacts, with respect to their own operations, the operations of their subsidiaries, and the value chain operations carried out by entities with whom the company has an established business relationship. 

The proposal also aims to establish accountability through corporate liability for violations related to insufficient due diligence.

What the draft directive refers to as ‘corporate sustainability due diligence’ draws on what the OECD Guidelines for Multinational Enterprises refer to as ‘risk-based due diligence’, and what is referred to as ‘human rights due diligence’ by the United Nations (UN) Guiding Principles on Business and Human Rights (UNGPs). Indeed, the proposal refers directly to those two international soft-law instruments, which are generally considered state of the art for responsible business conduct (RBC).

This form of due diligence is a process to identify, prevent, mitigate, remedy and account for risks or actual harm caused by the company (or its partners) to society. Unlike financial or legal liability due diligence, the focus is not on risks to the company, although of course societal (including environmental) harm may also affect the company negatively (see also Buhmann 2018). 

For companies covered by the directive, this will fundamentally change RBC from being voluntary to becoming legally binding

The Draft has generally been welcomed by business associations, although some remain hesitant towards a (much watered-down) proposal to strengthen top-level sustainability corporate governance. Civil society also generally approve although the range of companies covered has been criticized for being too narrow, and business relations too focused on contractual relations rather than impacts. The proposal’s introduction of civil liability with EU courts for victims from non-EU countries has been lauded. Yet this could and perhaps should also usher in a deeper debate on the fundamental characteristics of what constitutes adequate or meaningful remedy for harmful impacts on human rights impacts or the environment, and as importantly, how host-country victims will be ensured a de-facto equal standing with frequently well-resourced EU companies in front of EU courts. This short note addresses all of the above issues.

Part of EU corporate sustainability law

After a slow start up to around 2011, the EU has been moving fast since in an incremental development of increasingly detailed obligations on companies, including institutional investors, with the aim of creating transparency on business impacts on human rights, the environment and climate. Given the speed and political support for adopting EU law on these matters, it is quite likely that the proposed Directive will be adopted, although possibly with some changes. 

The proposal forms part of the larger package of corporate sustainability legislation undertaken by the EU recently. This includes the Taxonomy Regulation (which also refers to procedures that companies should undertake to ensure alignment with the UNGPs ad OECD Guidelines); the Non-Financial Reporting Directive (requiring some information on due diligence and risk assessments on human rights), which is expected to be replaced by the Corporate Sustainability Reporting Directive; and the Disclosure Regulation, which requires financial product providers to publish certain types of sustainability related information, including information on due diligence related to harmful impacts on environment and human rights.

The draft Directive builds on a proposal from the European Parliament, but it also follows trends in several individual EU countries to introduce mandatory risk-based due diligence. 

What companies are covered?

The draft Directive applies to ‘very large’ EU based companies (more than 500 employees on average and a worldwide net turnover exceeding EUR 150 million). ‘Large’ companies (having more than 250 employees on average and more than EUR 40 million worldwide net turnover) are included if they operate in specific high-risk sectors: textiles (including leather and related goods), renewable natural resources extraction (agriculture, forestry and fisheries), and extraction of minerals.

The draft Directive’s listing of activities related to minerals is quite wide and applies regardless of the place of extraction. They will therefore apply to many types of raw-materials used in the EU, including those used for power and heating, construction and the ‘green’ energy transition.

Non-EU-based companies are covered if their turnover in the EU corresponds to that of ‘very large’ companies, or that of high-impact sector companies for activities in those sectors. It is expected that requirements will be cascaded onto SMEs through the value chains that they are part of. 

What are companies required to do?

Importantly, like risk-based due diligence and human rights due diligence, corporate sustainability due diligence is not a compliance obligation simply discharged by undertaking and documenting a specific action.

Rather, as established by the UNGPs and the OECD Guidelines, it is an ongoing task that requires continuous assessments of risks or actual harm, and re-assessments, follow-up and efforts to prevent risks from becoming actual harm, and mitigation and the provision of remedy when harm has occurred.

Although the draft Directive seeks to establish that, it does rely heavily on companies applying contractual assurances, audits and/or verification. As argued by the expert organization SHIFT, these are not necessarily the best options for the purpose.

The due diligence obligations proposed are generally in line with the UNGPs and the OECD Guidelines, but in some ways narrower. This applies in particular to the limitation of some aspects of the due diligence process to what the draft Directive defines as ‘established business relationships’, i.e. relationships of a lasting character. This contrasts with the UNGPs and OECD Guidelines which do not require a business relationship (e.g. with a contractor, a subcontractor or any other entity such as a financial partner) to be lasting but, rather, focus on the connection between the company and risk or harm. This is one of the points that have generated criticism of the draft. 

Directives must be implemented by Member States. The means that some specific requirements may differ across EU countries. However, regardless of this companies will be required to integrate due diligence into all their policies and have a policy for due diligence that describes the company’s approach, contains a code of conduct for its employees and subsidiaries, and its due diligence process.

This must include verification of observation of the code of conduct and steps to extend its application to ‘established business relationships’. In terms of specific steps, companies must identify actual and potential adverse impacts; prevent potential adverse impacts; and bring actual impacts to an end (whether they were, or should have been, identified) or minimize impacts that cannot be stopped. In that context they should seek to obtain cascading by seeking contractual commitments from business partners in the value chain.

However, contrary to the UNGPs’ recommendations, there is no requirement that the company actively engages with business partners in its value chain to enhance due diligence cascading. Moreover, the provisions on involving potential or actual victims (‘affected stakeholders’) meaningfully in the development of prevention action plans, let alone the identification and redress of risks and impacts, lags behind the UNGPs.

In line with the UNGPs and OECD Guidelines, ceasing business relationships is not considered the first option. Rather, collaboration should be sought in order to advance better practices. If that is not possible, cessation a relationship may be appropriate.

Companies must also set up a complaints mechanism that can be used by affected individuals, trade unions and civil society organisations. Moreover, companies must regularly monitor their operations and due diligence processes, those of their subsidiaries and ‘established business relationships’ in the relevant value chain. They must also regularly report on these non-financial issues. 

Overall responsibility for the due diligence actions is charged on a company’s directors as part of their duty of care.

Enforcement: administrative and civil liability

Companies’ compliance will be monitored by authorities in each EU country. They may request information from companies and carry out investigations based on complaints by individuals or organisations, or on their own initiative. They may impose interim measures to try to stop severe or irreparable harm, and sanctions for violations of the due diligence requirements.

Companies will not be entitled to public support if they have been issued with sanctions under the directive. 

Importantly, companies can be subject to civil liability for damages resulting from a failure to adequately prevent a potential harmful impact or bring an actual impact to an end. Civil liability means that victims (or in the terminology of the UNGPs and OECD Guidelines: ‘affected stakeholders’) must themselves sue the company. 

A step forward for accountability and victims – but multiple challenges remain

The institution of civil liability for third-country victims in front of courts in EU-based companies’ home states is clearly an advance in regard to establishing formal accountability. However, the complexities of the legal system, especially for those seeking damages through civil liability, can hardly be overestimated. This challenge has been absent from most discussions leading up to the current draft Directive.

By contrast to criminal courts, civil courts generally make judgments based on the ability of one party to convince the court of its arguments. Research has shown that formal civil liability regimes tend to favour those who have the legal knowledge resources to do so. A market based good, legal expertise can be very expensive. The better the record in obtaining results that a client wants, the higher the cost. This may cause a highly problematic discrepancy between the possibilities of victims/affected stakeholders and companies to argue their case. Even if some victims are able to be assisted by civil society organisations, their legal expertise for arguing a case in court, or their resources to obtain such expertise, will not necessarily match those of companies.

Moreover, the civil liability regime focuses on economic damages and compensation. Although that may be relevant in some cases, in others a sum of money does not adequately redress harm suffered. Indeed, the UNGPs emphazise that remedy can take many forms of which economic compensation is only one. 

Arguably, the draft Directive falls short of adequately considering the situation of victims in non-EU countries in regard to having not just formal but actual meaningful access to justice in front of courts. It presents an approach to remedy that does not necessarily fit the complex situations and limited resources of victims/affected stakeholders. It is to be hoped that as the draft will be negotiated and amended towards the version that may be adopted, this issue will gain further prominence.

Conclusion 

The draft directive is an important development towards ensuring that companies based or operating in the EU take steps to identify and manage their harmful impact on the environment and on human rights, and to provide accountability. Although the draft does not cover all EU-based companies, it does cover the largest ones, and large ones in the textile, renewable and non-renewable natural resource extraction, all of which are known to be high-problem sectors. However, the affected stakeholder engagement, remedy and accountability provisions of the draft display too limited understanding of the situation of victims/affected stakeholders.


About the Author

Karin Buhmann is Professor of Business and Human Rights at the department of Management, Society and Communication at CBS, as well as the Director of the Centre for Law, Sustainability and Justice at University of Southern Denmark. Her research and teaching focus on sustainability and responsible business conduct (RBC) with a particular emphasis on social issues, especially in climate change mitigation, business responsibilities for human rights, and sustainable finance.


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Lobbying as if it mattered

By Dieter Zinnbauer

◦ 6 min read 

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”.


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To stay or to go: Corporate complicity in human rights abuses after the coup d’état in Myanmar

By Verena Girschik & Htwe Htwe Thein

◦ 2 min read 

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.

“A Little Less Unsustainable Is Not the Same as Sustainable” – Why Including Fossil Gas and Nuclear Power Will Harm the EU Taxonomy

By Andreas Rasche 

◦ 3 min read 

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: 

  1. 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
  2. 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. 
  3. 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…


About the Author

Andreas Rasche is Professor of Business in Society and Associate Dean for the Full-Time MBA Program at Copenhagen Business School. More at: www.arasche.com


Photo by Frédéric Paulussen on Unsplash

Moving towards mandatory CSR – EU’s mandatory Human Rights Due Diligence proposal

By Johanna Jarvela

◦ 2 min read 

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. 


Photo by Lan Nguyen on Unsplash

Climate Change and Magical Thinking

By Steen Vallentin

◦ 7 min read 

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 look inside 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.

What is Magical Thinking?

To begin with a definition, magical thinking refers to “the idea that you can influence the outcome of specific events by doing something that has no bearing on the circumstances”. It is a well-known phenomenon in the area of human health and disease. Children are known to practice it. 

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.


Further Reading

King, A.A. & Pucker, K.P. (2021). The Dangerous Allure of Win-Win StrategiesStanford Social Innovation Review, Winter. Online first.  

Sjåfjell, B. (2018). Redefining the Corporation for a Sustainable New EconomyJournal of Law and Society, 45(1), 29-45.


About the Author

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. 


Heading photo by Kristopher Roller on Unsplash.

Like oil and water…. Shell’s climate responsibility and human rights

By Kristian Høyer Toft, PhD

◦ 4 min read 

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 COas 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.


About the Author

Kristian Høyer Toft, PhD in Political Science, Aarhus University 2003. During 2020-21 a guest researcher at the CBS Sustainability Centre, Copenhagen Business School. His research focuses on corporate moral agency, political theory of the corporation and climate ethics and is published in Business and Human Rights JournalEnergy Research and Social Science, and in the book Corporate Responsibility and Political PhilosophyExploring the Social Liberal Corporation (Routledge 2020). 


Photo by Irina Babina on Unsplash

Corporate democratic responsibility – messy and difficult, yet urgent and without alternative

By Dieter Zinnbauer

◦ 4 min read 

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 auditan 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”.


Photo by Fred Moon on Unsplash

Mapping unchartered territory: Ecuador’s journey to sustainable palm oil

By Mathilde Birn, Sanne Qvarfordh, & Dr. Kristjan Jespersen

◦ 3 min read 

Sustainability certifications have become a widely used mechanism to signal to consumers that a product was ostensibly produced sustainably. Nevertheless, such certifications typically fail to scale beyond at most a fifth of global production. Within the palm oil sector, widely known as a major deforestation driver, the Roundtable for Sustainable Palm Oil (RSPO)’s Jurisdictional Approach is one of a growing number of examples of upscaling strategies. Under the Jurisdictional Approach, all value-chain actors within a province or even an entire country would be certified simultaneously. Ecuador is piloting the initiative at the national scale and is currently developing a national commitment.

The research is informed by 21 interviews with a variety of actors in the Ecuadorian palm oil sector. After qualitatively coding these interviews and looking for common patterns, we identified four main motivations behind Ecuadorian interest in jurisdictional palm oil certification. First, interviewees reported a concern that Ecuador risked losing market access due to sustainability-related import restrictions and consumer preferences in certain markets. Second, 90% of Ecuador’s palm oil producers are smallholders, whose resource limitations make it difficult to achieve RSPO certification on their own. Under the Jurisdictional Approach, smallholders would be grouped together, allowing them to pool resources and share costs. Third, the Jurisdictional Approach facilitates governmental sponsorship for smallholder capacity building. Fourth, previous experience and institution-building around sustainability in general and anti-deforestation in particular produced forward momentum on the part of the civil society and the Ecuadorian government that has led to an institutional infrastructure favourable to ideas like the Jurisdictional Approach.

In the most optimistic scenario, the Ecuadorian government’s commitment to the Jurisdictional Approach, strengthened by multi-stakeholder support, could encourage more sustainable production practices. However, we also identified certain risks associated with the implementation of the initiative. These risks especially significant given the Jurisdictional Approach’s relative novelty. As one interviewee put it: “we have been flying the plane while we’re building the plane”.

We have identified six key risks to Ecuador’s implementation of the RSPO Jurisdictional Approach and paired them with mitigation recommendations. This list is certainly not exhaustive and ought to be further assessed and developed by local stakeholders equipped with relevant expertise.

The Jurisdictional Approach affects several different stakeholder groups with diverse interests that must be actively engaged in the process to achieve success. To this end, efforts should be made to include representatives of stakeholders that are currently missing (or insufficiently represented) in the governance structure of the RSPO Jurisdictional Approach in Ecuador. These stakeholders include academia (which was involved in the beginning of the process but no longer is), domestic civil society organizations, local communities (including Afro-Ecuadorian and indigenous peoples), local governments, and representatives of the global palm oil industry.


About the Authors

Mathilde Birn graduated from CBS with a BSc and MSc degree in International Business and Politics. Academically, her main interest is within the field of sustainable development and the impact of stakeholder dynamics on such development, with a focus on emerging economies.

Sanne Qvarfordh graduated from CBS with a BSc. and a MSc. degree in International Business and Politics. Her main academic interest is sustainable development in emerging economies, with a focus on multi-stakeholder initiatives in Latin America.

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.


Photo by Andrés Medina on Unsplash

Responsible to whom and for what?

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.


A forthcoming special issue of the journal Human Relations, ‘Contesting Social Responsibilities of Business: Experiences in Context‘ is devoted to addressing such issues.  Core questions that the SI is designed to address include:

  • 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 held on 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.


Who really cares about the SDGs when it comes to nobody’s responsibility?

By Suhyon Oh

◦ 2 min read ◦

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.  

The Uberization of corporate political action

By Dieter Zinnbauer

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”.


Photo by ryan park on Unsplash

Insecure work: rethinking precarity through Kenya’s tea plantations

By Hannah Elliott

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.


References

Kathleen M. Millar (2017) ‘Towards a critical politics of precarity’. Sociology Compass, 11 (6), pp. 1-11.

Henrietta Moore, Andrew Percy, Jonathan Portes and Howard Reed (2017) Social prosperity for the future: A proposal for Universal Basic Services. Social Prosperity Network Report: Institute for Global Prosperity, UCL.


About the Author

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. 

Delivering and Financing Better Societies

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 to raise 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.


Further Reading

Luise Noring (2019) Public asset corporation: A new vehicle for urban regeneration and infrastructure finance. Cities.

Bruns-Berentelg, J., Noring, L., & Grydehøj, A. (2020). Developing urban growth and urban quality: Entrepreneurial governance and urban redevelopment projects in Copenhagen and HamburgUrban Studies.


About the Author

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.


Photo by Denys Nevozhai on Unsplash

Friedman’s critique of CSR at 50: birthday surprises

By Jeremy Moon

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. 1 is 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. 2 is 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. 3Friedman 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:

  1. 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.
  2. the institutionalization of CSR through private authority (principles, standards, audits, reports) and its intersection with civil society and democratic government.
  3. 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…). 


References

[1] M. Friedman “The Social Responsibility of Business Is to Increase Its Profits”, New York Times Magazine, 13 September 1970.

[2] M. Porter & M. Kramer “Creating Shared Value”  Harvard Business Review, Jan  – Feb 2011.

[3] E.g. Lynn A. Stout. The Shareholder Value Myth: How Putting Shareholders First Harms InvestorsCorporations, and the Public, 2012.

[4] E.g. Not Fit-for-Purpose: The Grand Experiment of Multi-Stakeholder Initiatives in Corporate Accountability, Human Rights and Global Governance (Summary Report), MSI Integrity, 2020.


About the Author

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


Photo Source: Milton Friedman blowing out the candles on his birthday cake, while his wife Rose and other party attendees look on. 15 July 1987. ©Hoover Institution Archives.

Economics for Life

Time for a New Economics

By Sandra Waddock

Steen Valentin recently pointed out in a BOS blog that we – and particularly economists – need to look beyond Milton Friedman’s famous New York Times argument that ‘The social responsibility of business is to increase its profits’. Friedman’s argument underpins today’s dominant ideology and the economics that shapes it – neoliberalism.

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!


Further Reading

Sandra Waddock, Reframing and Transforming Economics around Life, Sustainability, 2020, 12, 7553; doi: 10.2290/su1218755


About the Author

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.


Photo by Echo Grid on Unsplash

Making the case for and against and beyond Friedman in 2020

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

By Steen Vallentin

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

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

Dwindling relevance

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

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

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

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

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

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

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

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

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

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

The Friedman doctrine nonetheless

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

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

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

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

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

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

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

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

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

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

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

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

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

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


References

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


About the Author

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

Private Standard-setting Organizations and the Theory of Change

Theory of Change – Evaluating Supply Chain Outcomes

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

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

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

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

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

ISEAL – The Standard for Standards

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

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

Case in Point – RSPO

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

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

The Mechanics of TOC

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

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

The Role of Interactive Adaptivity in Supply Chains Evaluation

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

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

About the Authors

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

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

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

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


Photo by Jungwoo Hong on Unsplash

Supplier perspectives on social responsibility in global value chains

By Peter Lund-Thomsen

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:

Building A Better Planet: Toward a Sustainable Post-COVID-19 Society

Small, yet important – and still responsible. Reflections on SMEs and social responsibility in times of Covid-19

How the pandemic can reset cities and transform aspects of urban mobility

The Coronavirus Pandemic – and the Consequentiality of Metaphors

Sustainable Development, Interrupted?

The Political Economy of the Olympics – Misconceptions about Sustainability

Supply Chain Responsibilities in a Global Pandemic

A Green and Fair COVID-19 Recovery Plan

In Movement from Tanzania to Northern Italy to Denmark

How to make food systems more resilient: Try Behavioural Food Policies

Lobbying and the virus – three trends to take note of


Image by International Labour Organization ILO

Building A Better Planet: Toward a Sustainable Post-COVID-19 Society

By Daniel C. Esty

Covid-19 has dominated policy thinking across the world for several months – highlighting our vulnerability to unexpected threats, the fundamental reality of global interdependence, the critical role of science and data, and the value of collaborative efforts in response to a common challenge. And when the short-term public health crisis abates, the middle-term focus will be on economic recovery. But we should think now about the longer term – and the need to build a sustainable society that steps up to another looming threat: the prospect of destabilizing climate change.  Thus, as we rebuild our economy, we must do so in a way that moves us toward a clean and renewable energy future as well as addressing other pressing sustainability issues including air and water pollution, waste and chemicals management, and our depletion of natural resources.

To help launch the conversation about the pathways to a sustainable future, I offer below 10 key elements to consider. These concepts build on the ideas laid out in the recently released book, A Better Planet: 40 Big Ideas for a Sustainable Future, that emerged from a multi-year research and policy initiative at Yale University, where I teach. For more information on the Yale Environmental Dialogue, please see the website.

1 ) End of externalities

A sustainable future requires that we commit to an end of externalities as the foundational principle for environmental policy.  This starting point would require that we implement the Polluter Pays Principle, which means that those who release air and water pollution or greenhouse gases would have to stop these harms or to pay for their pollution.  Likewise, any user of public natural resources – including water for irrigation, forests for timber, grasslands for grazing, or public lands for the extraction of oil, natural gas, or minerals – would be required to pay full price for the resources they take. 

To be clear, making companies pay for the harms they cause will expose some business models as fundamentally unsustainable and only profitable when externalities are not internalized.  These enterprises will have to remake their business strategies or go under.

2 ) Change in systems thinking

We must acknowledge that we live in a highly integrated world, as COVID-19 has so painfully made clear.  Complex human and ecological systems require moving beyond traditional siloes to systems thinking — and regulatory design that links energy, environmental, and economic policies.  More fundamentally, we must accept the fact that we will need to pursue multiple goals simultaneously and learn to do so in an integrated way that accepts the reality that our goals will sometimes be in tension — and thus need to be traded off and balanced.

3 ) Top-down targets & bottom-up implementation

We must recognize that policy frameworks and structures require both top-down targets and bottom-up implementation. This lesson has become plainly evident in the climate change context, where it is now clear that presidents and prime ministers do not control all the levers of society that must be pulled to deeply decarbonize our economy.

 To achieve a sustainable future, mayors, governors/premiers, and other subnational political leaders – who often control economic development, transportation systems, and other key points of policy leverage — must play a significant role in reducing greenhouse gas emissions and building a more resilient society.

Likewise, business leaders – who also make day-to-day choices that profoundly shape the prospect for moving society onto a sustainable trajectory – must also be included in this conversation.  Fortunately, both the 2015 Paris Climate Change Agreement and the UN Sustainable Development Goals (SDGs) expressly acknowledge the need for broader engagement of exactly this kind.  

4 ) New economic model

New policy tools must replace the 20th Century command-and-control regulatory model with economic incentives and other market mechanisms.  While the government mandates of the past have allowed us to dramatically reduce pollution levels compared to five decades ago, further progress depends on price signals and a commitment to making emitters pay for the harm they cause.

5 ) New roles & various actors

Environmental progress must recognize new roles for various critical actors.  Specifically, in decades past, the business world was seen as the source of pollution problems. But today, most corporate leaders recognize the need to be good environmental stewards so as to maintain their company’s social license to operate. They recognize that old notions about the mission of corporations being centered on shareholder primary and the maximization of profits has given way to a stakeholder model in which businesses have responsibilities not only to shareholders, but also to their customers, suppliers, employees, and the communities in which they operate. 

Individuals are also advancing sustainability in new and important ways that go well beyond their long-recognized role as voters. Specifically, individuals today can make a difference as green consumers who make choices every day about which products to buy and which companies are selling sustainable goods and services. Likewise, a growing set of sustainability-minded investors are tracking environmental, social, and governance (ESG) performance metrics to ensure that their portfolios align with their values – and they hold shares in companies that are showing the way toward deep decarbonization and sustainability more generally. 

And some impact investors are putting money directly into sustainability projects and enterprises with an expectation that their funds will make a difference in society as well as a financial return.

  Finally, all of us with a smartphone can serve as watchdogs — capturing and sharing evidence of environmental wrongdoing on social media.  We are also all positioned to offer comments and participate in public environmental debates in many places and ways that were not possible prior to the Internet era.  This expanded access should deepen public participation and improve the diversity of perspectives that get factored into policy decisions.

6 ) Sustainable markets

We need sustainable markets that incorporate new lessons from various emerging fields of science and other emerging academic disciplines. Industrial ecology, for instance, offers new methodologies for mapping the flows of energy and materials across the economy.  In this regard, as we rebuild business in the many sectors devastated by the Covid-19 pandemic, we should look sector-by-sector for opportunities to create closed loop production processes that generate zero waste.  Such a system would focus on water recapture and the reuse and recycling of other materials.

We might, in this spirit, shift away from plastic packaging that generates greenhouse gas emissions as it is produced and too often accumulates after use in the ocean – and move toward fiber-based materials that can be more easily recycled or composted.

7 ) New tools & Big Data

Policymakers have a set of new tools at their disposal that can be deployed in support of a sustainable future.  Big Data, in particular, has abundant applications that can help us to reduce environmental impacts – tracking emissions, identifying best practices in pollution control and natural resource management, and providing metrics that help us to identify policy leaders to emulate and laggards who should be spurred to do better.  And while 21st information and communications technologies have transformed how sports teams pick players, businesses market to their customers, and all of us make purchases, technological solutions have done rather little to reshape the environmental realm.  But recent advances in data analytics, genomics, artificial intelligence, and machine learning all show significant promise for having important environmental applications.

8 ) Ethical foundation

We must build an ethical foundation for 21st Century sustainability that captures the public’s evolving thinking about core values and fundamental principles. Most notably, the idea of environmental justice and concerns about equity and inequality make it clear that our policy programs must pay attention to who benefits from environmental commitments and who gets ignored.

Indeed, who pays for environmental inaction – including lead exposure from aging water pipes or asthma risk when urban air pollution is not abated – has become a fundamental question. 

As we seek to “build back better” after COVID-19, climate change equity issues need to be given a more prominent role – both the intergenerational burden that the build-up of greenhouse gases in the atmosphere threatens to leave for today’s young people and the reality that movement toward a clean energy future will dislocate some communities, industries, and demographic groups in ways that will require transition assistance.

9 ) New ways of communication

We need a new approach to environmental communications and a commitment to translate expert guidance and science to the public in a manner that makes sense to everyday citizens. Tony Leiserowitz and the Yale Program on Climate Change Communication have demonstrated, for example, that political leaders must learn to distill and effectively translate scientific concepts and results to the public.  And as Thomas Easley makes clear in his Better Planet essay “Hip Hop Sustainability,” we need new strategies that bring the climate change conversation to inner cities and other subsets of society in a way that engages those communities in their own language and on their own terms.

10 ) Innovation

Finally, a spirit of innovation must permeate the push toward a sustainable future.  To create an environmental policy framework that is lighter, faster, and more effective than our regulatory programs of the past, we must harness the entrepreneurial capacity and creativity that exists all across the world.  Innovation broadly-conceived has already brought us technology breakthroughs in wind, solar, tidal, wave, and fuel cell power. But we must seek innovation beyond the technology domain. We need to be equally committed to fresh thinking and new approaches to finance and investments in clean energy, government policies and incentives, public engagement strategies, and public-private partnerships. 

Such innovation can reduce the cost of creating a sustainable future and diminish the perceived tradeoff between environmental progress and economic prosperity.

Despite recent challenges, the promise of a more sustainable society seems ever closer, but still just over the horizon.  Progress thus depends on sustainability pioneers who are willing to run out front, innovate broadly, take on risks, accept failures (and redeploy resources quick when unsuccessful pathways are identified), and redouble their commitment to efforts that show promise.

This commentary builds on Dan Esty’s April 2020 virtual lecture at Copenhagen Business School and the University of Copenhagen.


About the author

Dan Esty is Hillhouse Professor of Environmental Law and Policy, Yale School of Forestry & Environmental Studies and Yale Law School


More about Covid-19 pandemic on Business of Society blog:

Small, yet important – and still responsible. Reflections on SMEs and social responsibility in times of Covid-19

How the pandemic can reset cities and transform aspects of urban mobility

The Coronavirus Pandemic – and the Consequentiality of Metaphors

Sustainable Development, Interrupted?

The Political Economy of the Olympics – Misconceptions about Sustainability

Supply Chain Responsibilities in a Global Pandemic

A Green and Fair COVID-19 Recovery Plan

In Movement from Tanzania to Northern Italy to Denmark

How to make food systems more resilient: Try Behavioural Food Policies

Lobbying and the virus – three trends to take note of


Image by Free images

Small, yet important – and still responsible. Reflections on SMEs and social responsibility in times of Covid-19

By Søren Jeppesen

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.


References

Langevang, T., Gough, K. V., Yankson, P. W., Owusu, G., & Osei, R. (2015). Bounded entrepreneurial vitality: The mixed embeddedness of female entrepreneurship. Economic Geography, 91(4), 449-473.

Spence, Laura J., Jedrzej George Frynas, Judy N. Muthuri, Jyoti Navaret, 2018. Research Handbook on Small Business Social Responsibility: Global Perspectives. Edward Elgar Publishing.

Tran, Angie Ngoc & Søren Jeppesen. 2016. SMEs in Their Own Right: The Views of Managers and Workers in Vietnamese Textiles, Garment, and Footwear Companies. Journal of Business Ethics, 137(3), 589-608


About the author

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:

How the pandemic can reset cities and transform aspects of urban mobility

The Coronavirus Pandemic – and the Consequentiality of Metaphors

Sustainable Development, Interrupted?

The Political Economy of the Olympics – Misconceptions about Sustainability

Supply Chain Responsibilities in a Global Pandemic

A Green and Fair COVID-19 Recovery Plan

In Movement from Tanzania to Northern Italy to Denmark

How to make food systems more resilient: Try Behavioural Food Policies

Lobbying and the virus – three trends to take note of


Image by US Army Africa

On the Ground: What CSR and sustainability standards fail to address

By Hannah Elliott

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.


Image by ©2010CIAT/NeilPalmer

The problem with CSR: why companies need to listen to their activist employees

By Luda Svystunova and Verena Girschik

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 social inequalities. 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:

de Bakker, F. G., Matten, D., Spence, L. J., & Wickert, C. (2020). The elephant in the room: The nascent research agenda on corporations, social responsibility, and capitalismBusiness & Society, in press.

Feix, A., & Philippe, D. (2020). Unpacking the narrative decontestation of CSR: Aspiration for change or defense of the status quo?Business & Society59(1), 129-174.

Kaplan, S. (2020). Beyond the business case for social responsibilityAcademy of Management Discoveries, 6(1), 1-4. 

Khan, F. R., Munir, K. A., & Willmott, H. (2007). A dark side of institutional entrepreneurship: Soccer balls, child labour and postcolonial impoverishmentOrganization studies28(7), 1055-1077.

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


Image by GeekWire Photo / Monica Nickelsburg

Lobbying and the virus – three trends to take note of

By Dieter Zinnbauer

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”.

Twitter: @Dzinnbauer

Essays: https://medium.com/@Dzinnbauer

Working papers:  https://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=1588618


More about coronavirus pandemic on Business of Society blog:

The Coronavirus Pandemic – and the Consequentiality of Metaphors

Sustainable Development, Interrupted?

The Political Economy of the Olympics – Misconceptions about Sustainability

Supply Chain Responsibilities in a Global Pandemic

A Green and Fair COVID-19 Recovery Plan

In Movement from Tanzania to Northern Italy to Denmark

How to make food systems more resilient: Try Behavioural Food Policies

Photo by Dieter Zinnbauer

The Coronavirus Pandemic – and the Consequentiality of Metaphors

By Dennis Schoeneborn

Language is a reef of dead metaphors (Guy Deutscher)

We are in the midst of an unfolding crisis that humanity is struggling to understand. To make sense of the unknown, humans tend to rely on metaphors, analogies, or other rhetorical figures. What do metaphors do? They allow for giving meaning to a (rather unknown) target domain by projecting and transferring insights from a (presumably better known) source domain.

For instance, in the public discourse about the current Coronavirus pandemic, the sensemaking process includes analogies within the same domain (e.g., Trump stating at the beginning of the pandemic: “It’s just like a regular flu”; Bolsonaro maintaining for a long time that it’s just a “little flu”) –  or metaphors that tap into the source domain of natural disasters (e.g., the “tsunami” metaphor used by various medical professionals) or of human warfare (e.g., Trump’s more recent framing of coronavirus to be an “invisible enemy”; Macron’s insistence that “we’re at war”).

World leaders, journalists, social media influencers, epidemiologists and other contributors to the public debate can be presumed to mobilize such metaphors not only to foster sensemaking but ultimately also to steer citizens’ behavior.

For all that we know, metaphors tend to “have profound influences on how we conceptualize and act with respect to important societal issues”.

(Thibodeau & Boroditsky, 2011, p. 1)

Accordingly, it is worthwhile studying how and to what extent the use of different metaphors can inspire, influence and “organize” individual and collective behavior.

As the work by Joep Cornelissen reminds us, the fruitfulness of a metaphor depends on (1) its aptness (i.e. whether a metaphor ‘fits’ and it’s meaningful) as well as (2) its heuristic value (i.e. the extent to which a metaphor offers new insights into an unfamiliar domain; see Cornelissen, 2004).

However, aptness and heuristic value tend to be in a trade-off relation: While close proximity between source and target domain can help strengthen the aptness of a metaphor, it tends to diminish the metaphor’s heuristic value, at the same time. The latter problem also occurs when the metaphorical connection between two domain becomes so well-established (e.g., the link between epidemics and warfare) that the metaphor loses its ability to lend new meaning to the target domain (i.e. a term’s metaphorical quality “dies” so-to-speak; e.g., the term World Wide Web, where hardly anybody today would think of spider webs). In contrast, metaphors can be kept vivid and alive via the power of dissimilarity: the greater the contextual distance between two domains, the better the chance of a metaphor to be insightful.

This may be one of the reasons why novel and unusual combinations of metaphors, such as Tomas Pueyo’s notion of “The Hammer and the Dance” (while being aptly chosen in that case, as well) may have better prospects to lend new meaning to the pandemic and thus inspire new and desirable modes of behavior.

Taken together, the current crisis situation is also a crisis of collective imagination and sensemaking. Hence, in these turbulent and worrisome times it is more important than ever that contributors to the public debate think twice before mobilizing metaphorical imaginations – and to consider not only their aptness, heuristic value, or “retweetability” but also their potential (and sometimes unintended) consequences for individual, collective, and organizational behavior. Ultimately, it is not only the “brute fact” (Searle) of the pandemic that can severely harm us – but also the meanings that are ascribed to it (e.g., via metaphors) and that can materialize in very concrete actions.

For instance, individuals and collectives are likely to act less careful if they believe the Coronavirus to be “just like a flu” – and more careful if they grasp the virus to have chameleon-like features that make it hard to detect (e.g. recent evidence that the virus can also surface in damages to the heart and brain).

To conclude, the current pandemic serves as painful evidence for the importance of theories that highlight the constitutive role of communication for phenomena of orga­nization and organizing. In other words, communication in forms of metaphors, narratives, or other rhetorical means, especially if voiced by opinion leaders, tends to be not just “cheap talk” but can be highly consequential (as also powerfully shown by recent studies on “Narrative Economics” by Nobel Prize winner Robert Shiller).


About the author

Dennis Schoeneborn is Professor of Organization, Communication, and CSR at Copenhagen Business School, and Visiting Professor of Organization Studies at Leuphana University of Lüneburg. He serves as head coordinator of the Standing Working Group “Organization as Communication” at the European Group of Organizational Studies (EGOS). He furthermore serves as Associate Editor of the journal Business and Society.


More about coronavirus pandemic:

Sustainable Development, Interrupted?

The Political Economy of the Olympics – Misconceptions about Sustainability

Supply Chain Responsibilities in a Global Pandemic


Illustration by Dan Page

The Political Economy of the Olympics – Misconceptions about Sustainability

By Faith Hatani

In the midst of the global coronavirus crisis, the International Olympic Committee (IOC) and the Japanese government finally decided last month to postpone the Tokyo 2020 Olympics until next year. The general public across the world may have different views on the Olympics – positive and negative, or simply indifference. But with regard to the Tokyo Games, there is a fair reason for not just postponing them but reconsidering their relevance and preferably cancelling them altogether. The ongoing Covid-19 pandemic has underscored the long-standing controversies surrounding the Tokyo Olympics, and it is indeed sustainability that is at stake.

Economic problems in the host country

A tag line that Tokyo, the host city of the 2020 Olympics, has been using is “Recovery Olympics” for a sustainable future. The “recovery” is primarily referring to the recovery from the 2011 earthquake and tsunami, and the ensuing nuclear disaster in Fukushima, a city in northern Japan. When Tokyo was successful in its bid to host the Games, it estimated that the market effect of the Olympics and Paralympics would be more than JPY 32 trillion in total, which would be a huge boost to Japan’s shrinking economy. Clinging on to this rather optimistic figure, the IOC and the host government were reluctant to make any change to the original schedule in spite of the coronavirus pandemic, and their attitude was criticised as “wildly irresponsible” (Boykoff, 2020).

Besides the cost-benefit analysis of the Tokyo Games, it should be noted that, as of March 2020, nine years after the Fukushima disaster, approximately 48,000 people were still living in evacuation zones in Japan. Despite this, a huge amount of money has been spent on constructing new facilities for the Olympics, rather than aiming to reconstruct “sustainable cities and communities” (Sustainable Development Goal (SDG) 11) in the disaster-hit northern city. Meanwhile, the Tokyo Olympics has been the most over-budgeted Games ever, because of Tokyo’s lax policy.

Postponing the Olympics will entail an extended preparation/maintenance period for another year amid uncertainty, which is likely to impose an additional tax burden on citizens. It is highly questionable whether the host government has appropriately prioritised key issues and allocated resources accordingly.

Environmental issues: Value chains in the global sports industry 

The Olympics is big business, involving not only elite athletes, but also a large number of stakeholders such as sponsors, media, providers of various products, and spectators. A mass of people moves across borders and within the host country, consuming a great number of goods in just a few weeks. The huge amount of greenhouse gases and waste that each Olympic Games generates has been the subject of continuing international debate. These are also the problem areas addressed by SDGs 12 and 13.

On the other hand, the United Nations recognises that sport can be an enabler of sustainable development (UN General Assembly, 2018). If the host is committed to the SDGs, and stakeholders and resource-rich companies/countries collaborate to implement environmentally friendly technologies and practices, the Olympics could be a showcase of new ideas to facilitate sustainability. In this regard, the Organising Committee of the Tokyo Games has promoted several sustainability concepts and plans. Nevertheless, a group of non-governmental organisations has raised a question concerning Tokyo’s approach (Heineken, 2019). They reported that a huge new national stadium for the 2020 Games was built by cutting down trees in Indonesia and Malaysia, thereby damaging these countries’ efforts to preserve their rainforests (SDG 15).

When it comes to a mega sporting event such as the Olympics, we tend to, somewhat naively, pay attention to the downstream, in which big brands, celebrities, impressive new technologies and goods to consume are all visible, and we are often ignorant of what is happening in the upstream.

If the upstream of the whole value chain is neglected and sustainability is used (or misused) as just a fancy concept, while economic actors act irresponsibly, the SDGs will never materialise.

Health concerns: Summer heat as usual, and now Covid-19

Since Tokyo was selected as the host city for the 2020 Olympics, persistent health concerns have been raised. One of the almost inevitable problems in Tokyo is, in fact, a hot summer, which Weather Atlas describes as “oppressive humidity and extremely high temperatures”. Indeed, many people actually suffer illness each year due to the summer heat in Japan; in 2019 alone, more than 70,000 people were admitted to hospital due to hyperthermia.

Although Tokyo insists that the Olympic venues will be closely monitored with adequate safety measures, it is unclear how this can be guaranteed, not just for the athletes but also for the volunteers and spectators in the different locations.

Now, a new and bigger concern certainly involves Covid-19. To date (as of mid-April 2020), the number of confirmed cases in Japan has been significantly lower than the other G7 nations as well as neighbouring Asian countries. However, medical experts and other countries are sceptical, questioning whether Japan may be overly restricting coronavirus testing in order to maintain its safe image for the sake of the Olympics. Of course, the slow testing could be due to other factors such as the limited availability of testing kits, which has also been a problem for other countries. Nonetheless, the root cause of the concern is the slow response of the authorities in taking the necessary action, because this would trigger an explosion of infection cases as we have witnessed in other countries.

Although Tokyo eventually declared a state of emergency on 7 April, this was a few weeks later than the lockdowns enforced by many major countries, and two months after a coronavirus outbreak on the Diamond Princess cruise ship anchored offshore in Yokohama, just 30 km from Tokyo. Tokyo’s lenient approach casts doubt on its capability of dealing with communicable diseases when a rapid response is crucial (SDG 3). 

The point is not to abolish all future Olympic Games as this global sporting event can be an important platform for athletes, and potentially a contributor to peace (SDG 16), or at least a symbol of it. However, the Tokyo Olympics is missing the meaning behind sustainability in many ways. Furthermore, amongst other factors, it is also ill-timed. The world is now facing a serious challenge on a global scale.

One clear message that the coronavirus pandemic has taught us is that we may be vulnerable wherever we are – even in a wealthy country – and that we all have a responsibility to strive for sustainability.

In this context, financial resources should be invested in essential products and vaccine research to tackle Covid-19, and human resources should be allocated to immediate needs to sustain local societies. In short, get the priorities right. Then, strong global partnerships and cooperation (SDG 17) will hopefully facilitate our efforts and achieve a more meaningful positive outcome.


About the author

Faith Hatani is Associate Professor at the Department of International Economics, Government and Business at Copenhagen Business School. Her research interests reside in the role of international business in sustainable economic development, focusing on responsible management of value chains and institutional constraints in different industries and countries.


References

Boykoff, J. (2020) Cancel. The. Olympics. The New York Times.

Heineken, H. (2019) Olympic timber scandal. The Understory.

UN General Assembly (2018) Sport for development and peace

Photo by hitsujiotoko_xx

Read more about sustainability and Covid-19:

Sustainable Development, Interrupted?


Sustainable Development, Interrupted?

By Steen Vallentin

The coronavirus and responses to the pandemic are right now defining human existence inside and outside of organizations. All societal attention and communication are centred on the virus, its day-to-day consequences and possible future repercussions for the people, the economy – and the planet.

Indeed, we are living through a gargantuan social experiment, and these can turn out to be the defining weeks and months of the new decade. Social distancing. Lockdown of public institutions and private businesses. Closing of national borders. No travelling, no tourism. All live entertainment (sports, music, culture) suspended. Places for social gatherings (restaurants, cafés, bars) closed (except for takeaway). Until further notice. The mind boggles.   

The closing down of open societies is blocking the blood flow of large parts of the economy, spelling potential disaster for many businesses and cultural institutions – in spite of large relief packages. Meanwhile, waters are clearing and air pollution is going down due to the drop in industrial production. There is an ominous air about these climatic improvements, though. They seem more like a morbid dress rehearsal for life on earth after human civilization than a silver lining.

Is it the end of the world as we know it? Certainly, we can expect – at least in the privileged global north – that life will soon return to something much more normal than the current ‘show responsibility by staying as far away as you can from other people’. In Denmark, the gradual reopening of society is already underway.

However, the question remains whether we will look at each other and on human interaction (particularly in large social gatherings) in the same way as we did before. Will the awareness of ‘the others’ close to us as potential carriers of disease somehow stay with us.     

Certainly, the comparisons with war are fitting. Who would have thought that anything except a worldwide war could affect all people’s social lives and the workings of government and business so rapidly and profoundly?

The pandemic constitutes a crisis of public health and health systems of unforeseen magnitude. The noun ‘crisis’ derives etymologically from the Greek krinein (Latin: krisis), which means ‘turning point of a disease’. This point was made repeatedly in the wake of the financial crisis of 2008-9: a crisis constitutes a turning point and thus an opportunity for new things to happen, for things to be different and perhaps better than they were. As the saying goes: ‘never let a good crisis go to waste’.

After sickness, there is newfound health. A crisis is not supposed to persist. However, recent years have taught us new lessons. Crisis has to understood in the plural, as crises, there are many of them (climate crisis, refugee crisis, trust crisis etc.), they are systemic and interconnected and they do not seem to go away.

Thus, we live in an age of perpetual or recurrent crises. We can imagine another side to where we are now, a new and more social normal, but it is becoming more and more difficult to imagine a future without some profound element of crisis.

Speaking of the interconnectedness of crises, what impact will the pandemic have on sustainable development and the green agenda? Will the public health crisis, its resultant need for emergency relief and its immediate and longer-term negative impacts on the economy take the wind out of the sails of green transition for a while? Making us waste precious time.

Or will this crisis and the efforts needed to get the economic wheels turning again turn out to be the greatest of opportunities to invest in green infrastructure and the solutions needed to create a more sustainable future? At this time, it is anyone’s (more or less qualified) guess. Not least because the answer depends on actions not yet taken by government and business leaders. Both narratives are out there.

The pandemic obviously lends itself to many interpretations. Among them faith-based apocalyptic visions of the end of times. Others see potential in this for putting an end to capitalism, as we have known it. Certainly, market-based solutions are taking a backseat to government intervention in our current predicament. It appears that in times of profound crisis we have to rely on big government (federal, local) and political leadership to take care of the common good and sort things out.

Time will tell whether or how the pandemic and all that comes with it will change people’s view of the market economy and of the need for government intervention in the market economy – not to mention people’s proclivities to consume, travel, engage with (many) others in the experience economy etc.

The more moderate take is that we need a regulated market economy and that the current crisis shows the limitations of cost/benefit analysis and the neoliberal urge to subject all things to marketization and economization. In light of the human suffering and the deaths caused by the coronavirus and facing health systems and heroic health professionals in distress, the cost/benefit mindset has come up short. This calls for immediate action and full commitment – even if the odd economist may question the utility of such a course of action.

We should take this lesson with us into the broader realm of sustainable development. Market thinking will not suffice.


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.

Photo by Aron Visuals on Unsplash

Just announced: And the world’s worst company is …. Really?

Why naming a hardly known German company as the world’s most controversial company inadvertently makes a lot of sense

By Dieter Zinnbauer

Business bashing is a popular spectator sport in some quarters – sometimes justified, sometimes not. So there is certainly no shortage of strong contenders for the most controversial company contest. Who would be your pick for the 2019 shortlist? Perhaps one of the companies that led millions of people into opioid addiction? The biggest carbon dioxide emitter? Or someone from the big tech side that as many believe has ushered in a new, toxic era of surveillance capitalism?

Picking the unlucky winner is as difficult as it is subjective.  But as is always the case these days big data and AI are riding to the rescue. They are claimed to power an evidence-infused attempt by a boutique ESG consultancy to identify the most controversial company in the world. According to the inevitable marketing pitch, a secret-sauce algorithm churns through a proprietary database of millions of new and old media mentions for more than 140,00 companies to bring science to the art of naming and shaming and to reveal the 2019 most controversial company in the world.

And as just announced last week, the winner is:

Tuev Sued!

?

Tuev Sued?

If you are not a German car owner (the company is best known there for carrying out the obligatory and feared periodic car inspections) or an expert in technical certification issues you may have never come across this name before.

Tuev Sued is one of the big players in the global certification-of-everything business. Born as the Duev (“Dampfkesselueberwachsungsverein” – steam boiler inspection association) in 1800 to bring technical oversight to the issue of exploding steam boilers during the industrial revolution, the Tuev Sued (and its brother) Tuev Nord have grown into multinational enterprises that provide technical audits and certification services for an ever-growing number of products, processes and service across industries and across the world.

Arguably the main reason why Tue Sued was picked as the most controversial company (besides a weighing in favor of novel entries that guarantees sustainable newsworthiness to an annual ranking now in its 10th edition) is that it is implicated in the infamous 2019 Brumadinhu dam disaster in Brazil. A collapse of a dam erected by a mining company unleashed a toxic mudflow on the downstream communities that killed more than 250 people. Tuev Sued had carried out technical inspections of the dam and allegedly assessed it as safe. The case is still in court, no conclusive verdicts have been reached.

So is it fair to put the spotlight so fully on a comparatively small technical certification outfit, rather than say the big mining company that built and ran the dam?

Irrespective of what one thinks about the merits of this choice,  the case highlights what I would submit is one of the most fundamental and unresolved drivers of corporate irresponsibility: the persistent challenge to make all kinds of certification and assurance processes that are so essential to functioning markets and economies work as intended.

From the never-ending string of accounting and auditing scandals to the crucial role of rating agencies in the 2007+ financial crisis to emerging examples of greenwashing in the carbon market certification business, there as common thread: certification and assurance often fail to provide the independent, effective vetting that it is supposed to deliver.

Issues involved include:

  • the under-resourcing of the inspection process as neither principal nor agent have strong interests in overly strict and deep inspections,
  • pitching certification as loss leaders to open the door for upselling into other lucrative consulting services;
  • borderline rubberstamping of certifications to secure repeat business and avoid being viewed as difficult in the industry and thus putting off other potential clients.

Strengthening liability, setting more stringent standards for the standards watchdogs, tightening compliance measures and building public reputational pressure go some way to rework incentives towards more credible certifications.

But at the end of the day they are more ameliorative than tackling the root problem:

As long as certification services are selected by and directly paid for by the very clients that are meant to be certified, assured, rated or audited and as long as certification is strictly a for-profit business there are fundamental conflicts of interests at the root of these services that put their efficacy and independence at risk.

Ideas of how to rewire these markets and business models abound yet so far the problem of thin political markets seems to hold: both certifiers and certified have strong interests to preserve the status quo and formidable lobbying power to advocate for this, while the dull technical nature of the issues at stake and the dispersed group of beneficiaries from alternative solutions prevent a forceful, concerted push for better arrangements.

Yet there is hope that this fundamental conflict of interest issue will gain more prominence in the policy and public debates very soon. The emerging transformational push to de-carbonize businesses and economies relies in part heavily on carbon credits, carbon offsets and other green-impact instruments whose efficacy and the very reason for existence relies on proper certification and assurance.

 How to move beyond and away from issuer-directly-pays certification services will have to be an important part of the policy designs in the making.

Tuev Sued is a symptom of the problem – it is the systemic issue at the root of the case that justifies putting it into the spotlight – although it is unclear of the secret-sauce algorithm at work had this in mind when making the selection. 

Let’s hope that in twenty years’ time the idea of a rating agency, a dam examiner, a medical device inspector or a carbon credit certifier being selected by and paid directly by the people they are supposed to pass an independent judgment on appears as strange as the notion that a pharmaceutical company would be able to choose between different agencies to get its drugs approved and directly funds large parts of their budgets.


About the author

Dr. Dieter Zinnbauer is a Marie-Skłodowska-Curie Fellow at CBS’ Department of Management, Society and Communication. His CBS researches focus on business as political actor in the context of big data, populism and “corporate purpose fatigue”.

Twitter: @Dzinnbauer

Essays: https://medium.com/@Dzinnbauer

Working papers:  https://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=1588618

Photo by Icons8 Team on Unsplash

Responsible Tax in Multinational Enterprises – Why?

By Peter Koerver Schmidt

The tax practices of multinational enterprises (MNEs) attract massive interest in these years from the general media, policymakers as well as academia. This public interest is positive, as the subject is both interesting and important. At times, however, the debate can be polarized and rather futile.

Two quotes exemplify the wide spectrum of opinions quite well. On the one side of the spectrum, the more traditional opinion which in the words of NYU Professor David Rosenbloom can be expressed like this: “Taxes are a cost, like any other cost. There is nothing magical or special about taxes as a cost, except that they are subject to adjustment by government action.”[i] And on the other side of the spectrum, UK MP Margaret Hodge’s statement concerning Google’s tax planning set-up “We’re not accusing you of being illegal, we are accusing you of being immoral.”[ii]

Tax is and should be regulated by law

Currently, the zeitgeist strongly seems to favor the latter opinion, and it is often argued that MNEs face a moral or ethical obligation not to engage deliberately in strategic tax behavior solely designed to minimize tax payments. In other words, MNEs should act responsibly and refrain from aggressive tax planning.[iii]

Even though such statements are understandable and well intentioned, it is worth bearing in mind that taxation traditionally – and for good reasons – is an area densely regulated by law.

Generally speaking, the legal order (rule of law) creates stability and foreseeability and acts as an obstacle to power holders of society. This is also important within the area of taxation, as taxes are not voluntary and since taxation is a complex balancing act that needs to be carried out in a transparent democratic order. Moreover, equal and objective treatment of taxpayers presupposes a legal standard, as social/ethical norms are too vague to provide adequate guidance. Finally, yet importantly, procedural justice requires that taxpayers – including MNEs – have access to independent judicial review, in order to give the taxpayers a proper chance to explain themselves and to appeal.[iv]

Reputational risks and shareholders of flesh and bone

Does this mean that everything should just remain as it (perhaps) used to be?

In my opinion, the answer is no. Accordingly, policymakers should cooperate on a global and regional level (as they are already doing at the level of the OECD/G20 and the EU), in order to improve the current international tax regime and reduce the possibilities for applying aggressive tax planning strategies. Moreover, well-managed MNE’s should take account of the fact that the wider public expects them to act responsibly and to refrain from aggressive tax planning.

The reason why MNE’s should acknowledge the growing public distaste for aggressive tax planning strategies is in my view two fold, and does not rest on an inherent social/ethical obligation to so.

Instead, the first argument is based on the fact that responsible tax behavior by an MNE can mitigate a number of corporate risks and that corporate tax planning must be balanced against the potential costs of triggering reputational damage.[v] The second argument is that the management in MNEs should focus on maximizing shareholder welfare, not shareholder value.[vi]

In other words, it should be taken into account that shareholders at the end of the day are ordinary people of flesh and bone that are not only concerned about maximizing profits but also have social/ethical concerns. Accordingly, even though MNEs do not have an inherent social/ethical obligation to stay away from aggressive tax planning behavior there may anyway be good reasons to do so.

Currently, there are strong signs that MNEs have become more prone to critically re-consider their tax planning behavior. More and more MNE’s thus prepare and disclose tax policies/strategies that among other things define the framework for their tax planning behavior. In my view, this appetite for implementing policies on responsible tax is both sensible and laudable.


References

[i] H.D. Rosenbloom, Where’s the Pony? Reflections on the Making of International Tax Policy, 63 Bulletin for International Taxation 11, p. 535-542 (2009).

[ii] Public Accounts Committee Chairman Margaret Hodge. Quote from The Telegraph, November 2012: https://www.telegraph.co.uk/finance/personalfinance/tax/9673358/Starbucks-Amazon-and-Google-accused-of-being-immoral.html.

[iii] P. Schmidt & K. Buhmann, Taxation, General Anti-Avoidance Rules and Corporate Social Responsibility in Fair Taxation & Corporate Social Responsibility, p. 227-260 (K. Elgaard et al. eds., Ex Tuto 2019).

[iv] R.P. Österman, Perspectives on Corporate Taxation from a Sustainable Business Perspective in Challenges, in Managing Sustainable Business pp. 371-397 (S. Arvidsson ed., Springer 2018).

[v] A. van Eijsden, The Relationship between Corporate Responsibility and Tax: Unknown and Unloved, 22 EC Tax Review 1, p. 56-61 (2013). See also R. Knuutinen, Corporate Social Responsibility, Taxation and Aggressive Tax Planning, Nordic Tax Journal 1, p. 36-75 (2014).

[vi] O. Hart & L. Zingales, Companies Should Maximize Shareholder Welfare Not Market Value, Journal of Law, Finance, and Accounting 2, p, 247-274 (2017).


About the author

Peter Koerver Schmidt, PhD, is Professor with special responsibilities in tax law at Copenhagen Business School and Academic Advisor at CORIT Advisory. His research mainly focuses upon international (corporate) tax law, and it has been published in Danish, Nordic and international journals and anthologies. In addition, he has authored and co-authored a number of books, including a dissertation on Danish CFC legislation from an international and comparative perspective.

Photo by 401(K) 2012 available on Flickr.

Lead where others follow

By Sim de la Torre

One of the most exciting and influential areas of business today, Governance & Sustainability has also become a must-have skillset for business leaders looking to stay on top of their game. An MBA level certificate in Governance and Sustainability from CBS will enable you to take your organisation to the next level.

Providing sustainable directions

There’s little doubt that today’s business environment is evolving at a striking rate. And the increased focus on sustainability from the perspective of risk management, compliance and governance can often leave business leaders searching for clarity when they should be providing direction. These are strategically critical elements – some might say preconditions – of business today and they are defining the debates that are being held in boardrooms across the globe.

Andreas Rasche, Professor of Business in Society and CBS Associate Dean, explains more about this cutting-edge Concentration.

“To date, a lot of the conversation has been focussed on either the CSR or philanthropic agenda, but ours is based on the modern understanding of sustainability and how to govern; how to set agenda; and how to include cutting edge thinking and action across the sustainability field.”

Sustainable finance is one example of where managers are being challenged in this arena. How do you integrate wider social and environmental concerns – or responsibilities –  into your financial decision making? This is one of the Concentration’s key topics and MBA students will learn to balance the needs of society with the needs of their organisation.

Sustainability toolset

“Meanwhile,” says Professor Rasche, “another trend that we cover is corporate governance and risk management, which is all about steering an organisation and equipping you with the tools to make intelligent and reasoned recommendations to the board. The course will enable you to plot a path for the company from a business mindset while weaving in sustainability. And of course, we also help you to identity and exploit the opportunities that your organisation will face as a result of this agenda.”

Across the globe, the corporate governance debate is happening at the highest level of business and the leaders of today and tomorrow need to know how to have these conversations and how to steer their organisations effectively.

Be where the focus is

Other aspects covered by the course include circularity, which is particularly relevant to modern leadership, as well as risk management which often appeals to practitioner students. Says Professor Rasche,

“These mindsets can have a huge influence on an organisation and again, we’ll give you the tools you need to not just understand the conversation, but to make a valued input and be part of the debate. The things you learn today on this course will equip you for tomorrow. If you want to really know more, come and join us. Be where the focus is.”

In April 2020, you can start your CBS Executive MBA with a Concentration in Governance & Sustainability.  


About the author

Sim de la Torre is a former journalist turned freelance writer working with the CBS MBA programmes.

Photo by Ian Stauffer on Unsplash

Why consultations on large projects should matter to citizens as well as companies

By Karin Buhmann, Sanne Vammen Larsen and Anna-Sofie Hurup Skjervedal. This article is based on their previously written piece for the Centre for Business and Development Studies.

Insights into the concerns or needs of communities or individuals who may be affected by planned or proposed private or public energy projects or infrastructure projects is important for those who will eventually decide whether the project will be approved to make an informed decision. Such insights can be gained through consultations carried out as part of assessments of the environmental or societal impacts of projects.

This begs the question: what is a good process for stakeholder engagement of local communities and citizens in impact assessment processes? This is a global issue that in recent years has come to be high on the agenda in countries from the Arctic to the Global South.

Consultations as part of impact assessments

Consultations allowing for stakeholder involvement in impact assessments are common in regard to private projects concerning the establishment of mines, windfarms, sun-power farms and dams for hydro-power. The same applies to public infrastructure projects such as airports, roads and ports, which are often necessary for the transport of the products to be gained from private projects.

Societal impacts of projects are typically assessed through social impact assessment (SIA), environmental impact assessment (EIR), or human rights impact assessment (HRIA), or combined approaches such as ESIA or ESHRIA. All aim at identifying and preventing or mitigating adverse impacts and advance positive impacts, of planned projects or extension of existing ones. It is customary and often mandatory for the impact assessment to involve local stakeholders who are or may become affected by the project.

This typically takes place through consultations, which may take a variety of forms to enable public participation in the identification of the impacts of the planned activities. Consultations are organized by authorities or the organization having applied for a permit to engage in the new activity. In addition to environmental impacts, impact assessments often include the project’s effects on a range of broader societal issues, such as health and safety in the local areas, employment, local business and sources of income generation, etc.

The Nordics and many other countries have introduced mandatory consultations of local communities. Some international development banks, e.g. the World Bank, have made certain loans conditional on impact assessments.

Uncertainty about consultations

Despite the great significance of consultations for stakeholder involvement, there is often uncertainty with local communities and other groups of affected stakeholders in regard to what exactly a consultation is, what it entails and what to expect of the process. Moreover, even when consultations have taken place it is not infrequent that affected communities are unhappy with the process or the extent to which authorities take their concerns or needs into account.

For example, Sami groups living in the High North have complained to authorities in Norway and Sweden because they are concerned that windfarms disrupt the grazing areas of their reindeer and, as a consequence, the traditional way of life of the Sami. Authorities and business enterprises can also be unsure about what constitutes the proper process or ‘best practice’ for consultations with affected stakeholder.

Photo: Reindeer at Kvalsund, Norway/ K. Buhmann, 2019

What is a consultation?

Consultations on project activities are carried out to provide an informed foundation for decisions to be made. In providing access to participation in decision-making on activities that will affect one’s life at the everyday level, consultations contribute to a form of very direct democracy and can be argued to be part of the human right to public participation.

Consultations provide citizens with an opportunity to ask questions and express their views on a project. But as is the case for other democratic processes, one does not have a claim to seeing one’s views winning out. This is an important aspect for the appreciation of what to expect of a consultation; how to engage in a consultation process; and the information that authorities, companies and consultants must or should provide when conducting consultations.

It is not infrequent that consultations are conducted by a company involved in the project. A good consultation process marked by sincere dialogue and appreciation of local concerns can build understanding and acceptance of the final design of the project. A process that does not live up to local stakeholders’ expectations of influence can lead to the opposite result.

Accordingly, it is important for involved companies as well as authorities to ensure that stakeholders are given the information necessary to understand and assess how the project may affect them, what their rights are and what they can expect of the consultation process.

Local stakeholders’ expectations and understandings

Our investigations have demonstrated that it is not infrequent for actually or potentially affected stakeholders in a local community to be uncertainty of what a consultation entails or what to expect of the process and result. Others have shown that frustration results when authorities do not seem to take views made during a consultation into consideration in their decisions.

During meetings in northern Scandinavia in June 2019, we met with several inhabitants in Sápmi, who expressed frustration with consultation processes. Sápmi is the cultural region traditionally inhabited by the Sami people, an indigenous people who traditionally live from reindeer herding and fishing. Grazing areas on which the Sami’s reindeer depend are adversely affected by the establishment of windmills and mines.

Sami communities are involved and asked for their views through consultations, but they also see authorities granting permits to put up windfarms and new mines on contravention of the contesting views and concerns presented by the Sami during consultations. Authorities in Norway have granted permission to open a new copper mine in Northern Norway despite the opposing views submitted by the Sami Parliament (Sametinget). The motivation to engage actively in future consultations easily gets reduced, even with those who are aware that a consultation does not equal a claim to one’s views to be granted when central authorities are seen to make decisions affronting local democracy.

Some of our other meetings have shown that when English is a working language or the common ’lingua franca’ in an area that does not have English as its main language, mistranslations may occur and lead to misunderstandings about the process and objectives. For example, the Danish term for consultation, ‘høring’, often gets translated into English as ‘hearing’. This may give unintended associations to the conflict-oriented type of ‘hearing’ that takes place in courtrooms and it’s objective of determinations leading to a winner and a looser, thereby disrupting the understanding of the consultation’s objectives of dialogue and developing workable solutions. Our fieldwork in Greenland and elsewhere offers several examples of this mistranslation.

Consultations and the corporate ’social license to operate’

Consultations can contribute to risks of adverse impacts being identified and addressed before they develop into actual problems because consultations offer opportunities for local stakeholders, including those who are actually or potentially directly affected by the proposed project or project idea to express their concerns.

Because of this consultations not only matter to the longer-term well-being of the local community, but also to relations to the organization that is behind the project giving rise to the consultation.

For example, a consultation concerning a proposed mine matters not only for local stakeholders who are concerned with the mine’s impact on grazing areas or the quality of water, but also for the perception of the company that wants to carry out the project, and for trust in authorities who will be granting the permit or prescribe changes and conditions.

Authorities often delegate the task to conduct a consultation to the company that applies for an exploration or exploitation permit. One the one hand, this may strengthen the consultation process because the company conducting the process knows the project very well and is able to reply to questions of a technical character. On the other hand, participation in the consultation and trust in the process may suffer if local stakeholders, who are worried about contamination or other harmful effects, suspect that the consultation may be influenced by the company’s interests.

‘Fox in the henhouse’

Allowing the company that applies for a permit for the project to conduct the consultation can appear like letting the fox into the hen house.

However, if performed well, the company will obtain a better appreciation of the project’s impacts and will be able to make relevant adaptions. Likewise, authorities often lack both the necessary technical knowledge and other resources to conduct consultations. Companies lack knowledge, for example in regard to local issues are expected to purchase relevant expertise through consultant advice. The company thereby invests in establishing the necessary informed knowledge foundations for the permit to be granted by authorities.

When companies are given the responsibility to conduct consultations that may affect the decisions to be made by authorities, it is important that they carry out a correct and good consultation process that allows local stakeholders to participate at times suitable to them. If a consultation takes place during normal working hours many local stakeholders may decide to stay away because participating would mean a loss of income.

Likewise, participation may be limited if the consultation takes place in a location that requires long transport. Consultations conducted in another language than the local one reduces the opportunity for local stakeholders to engage in a dialogue. Unless technical or health-related issues are explained in a manner that matches the prerequisites of local stakeholders, risks arise that they will not obtain an adequate understanding of the impacts of the project. This will increase risks of misunderstandings and that relevant questions remain unasked, or that relevant concerns are not voiced.

Photo: Sheepfarm in Qassiarsuk, Narsaq area /K. Buhmann 2018

During field workshops in Southern Greenland in August 2018, we were given insights into a diversity of local experience of consultation processes and expectations. The point of departure for our meetings was a proposed mine in Kuannersuit (Kvanefjeld) by the town Narsaq. Greenland’s eight largest towns, Narsaq has a population of around 1,500 and is placed in an area with extensive sheep grazing and tourism based around ruins of the Norse settlers. The mine will produce diverse minerals and rare earth elements, with uranium as a by-product due to high uranium contents at this specific site.

Consultations have been conducted by the company. We met with several sheep-farmers and actors in the emergent tourism sector who expressed concern whether uranium dust from the mine would harm their business, income and human and animal health in the area. Several individuals were frustrated with the process of the consultation, such as meetings taking place at locations or times of the day or year that made it difficult for the sheep farmers to travel to the meetings and take part in them. Moreover, as the Sami noted above, several people in the Narsaq area were basically concerned that the authorities do not seem to take the concerns voiced into account. Several questioned whether the process is accordance with the ideals of a democratic society.

Ups and downs of consultations

When consultations work well they can contribute to a sense of common or including decision-making. Research shows that this underscores the acceptance of the resulting activity, related to what is sometimes referred to as the legitimacy of the activity.

When consultations do not work well they can have the opposite effect and undermine trust, not just in the specific project but also in the company or companies involved. This relates to what is sometimes referred to as the ‘social licence to operate’. The term ’social licence to operate’ relates to the risk of loss, that a company (or companies) run as a result of local protest or opposition to a project for which they have applied for a legal licence.

Even if a company has obtained a legal licence, for example, to undertake the exploration of minerals, local opposition may be present. There are indications that a weak social licence to operate is on the rise in Greenland, thereby affecting the local legitimacy of projects like the Kuannersuit mine in Narsaq (Bowles and MacPhail, 2019).

Greenland is a country based on the rule of law with strong institutions and regulation and traditionally a relatively high level of trust in authorities and their decisions. Observations that in such a society and despite formal requirements, there is lack of trust in consultations and arms-length between authorities and companies conducting the consultations, and that concerns voiced by local stakeholders during consultations are taken seriously and acted upon are severe indications that formal procedures are not sufficient for a good consultation process. Accordingly, it is important to understand what constitutes a good consultation process from the perspective of the individual stakeholder, even if there is still no claim to having one’s way in regard to the final decision.

References

Bowles, P & MacPhail, F (2019) Coming to the Surface: The Social Licence to Mine in Greenland. Paper submitted for international seminar ‘Problems and Perspectives of social responsibility in natural resources exploration, exploitation, and management’, Pskov State University, Pskov (Russia) 23-25 October 2019 (on file with lead author).

About the authors

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.

Sanne Vammen Larsen is an expert in the field of environmental planning and impact assessment, with a focus on integration of climate change in Impact Assessment, local processes and social impacts, and dealing with risk and uncertainty. She is employed as an associate professor at The Danish Centre for Environmental Assessment at Aalborg University, Denmark.

Anna-Sofie Skjervedal is PhD from Ilisimatusarfik – the University of Greenland and Aalborg University, and special consultant in public participation within the Municipality of Sermersooq, Nuuk, Greenland. Anna-Sofie specializes in public participation within impact assessment processes in relation to extractive industry development in Greenland with a focus on meaningful youth engagement.

Photo by davide ragusa on Unsplash

Better than nothing but still “exSASBerating”!

By Dieter Zinnbauer.

Why a powerful push by the world’s top asset manager towards more sustainability reporting still falls pretty short.

Great news

BlackRock, the world’s largest asset manager promises to leverage its weight and voting power for more consistent and comprehensive corporate reporting on sustainability. And this includes corporate lobbying.

Good news

The Sustainability Accounting Standards Board (SASB) standard that BlackRock backs also includes a reporting dimension on what it calls “Management of the Legal & Regulatory Environment”. According to the SASB this category “addresses a company’s approach to engaging with regulators in cases where conflicting corporate and public interests may have the potential for long-term adverse direct or indirect environmental and social impacts.” 

Now, this sounds quite promising.

It really seems to recognize the urgent imperative for business to align corporate political activity with its social and environmental responsibility and to assure all stakeholders in your reporting that this is the case.

Or to take a plain language and not entirely hypothetical example: as a responsible corporate citizen show everyone that you are not a hypocrite and that you do not lobby against improved fuel efficiency standards while at the same time celebrating your green credentials by supporting smart transport initiatives.

As the SASB further elaborates on this reporting dimension, the category addresses among other “a company’s level of reliance upon regulatory policy…  actions to influence industry policy (such as through lobbying) … [and ] it may relate to the alignment of management and investor views of regulatory engagement and compliance at large”[1]. And the related accounting metric mandates a “discussion of corporate positions related to government regulations and/or policy proposals that address environmental and social factors affecting the industry.”

One could be a stickler and criticize that this is not comprehensive and specific enough, as it, for example, does not require to disclose how much money is spent on specific lobbying issues or what other of the growing repertoire of corporate influencing and communication strategies beyond lobbying are deployed to shape the public policy debate on these issues.

But let’s be pragmatic, the fact that the world’s largest asset manager has chosen to explicitly demand reporting on lobbying from the many companies it invests in and also threatens openly to vote against boards of companies that do not play along is a great step forward.

But then the really not so good news

The SASB only requires companies to report on corporate political activity in sectors where this category is judged to be material. And quite startlingly corporate political activity is only viewed as material for some segments of the oil & gas sector, biofuels, and chemicals. That’s it.

How can this be? No mention of air freight & logistics, airlines, marine transportation or the car industry  – sectors in which many (but not all) companies are out in force to lobby against green taxes and/or higher resource efficiency standards, thus delaying much-needed investments in future-proof technologies and creating a regulatory backlog that all but exacerbates the material risks of stranded assets and failing business models further down the road.

How about construction materials or the steel industry whose future trajectories in energy efficiency or recycling and the rules and regulations that will apply are material to global sustainability and corporate success alike?

How about the meat, poultry and dairy sector? I have not researched their lobbying activities but would imagine that they are very much engaged around evolving rules for methane emissions as one of the most potent climate gasses in a world of growing appetite for meat. No need for investors to know how corporate strategy, public policy engagement and sustainability dynamics line up?

Or how about coal and electricity & power generation? Are these sectors viewed as a lost cause where corporate political action will simply be assumed to be misaligned with societal sustainability goals and thus not worthwhile accounting for? Does this do justice to and incentivize responsible corporate political engagement where it is perhaps more material and needed more than in many other areas?

These are just some examples with regard to climate change. Corporate political engagement is plausibly a material issues for many other sectors as well, for example when thinking about social aspects of sustainability, e.g. how platform economies craft business models and lobby on the rules that apply to gig work, how big tech seeks to shape privacy rules that are closely linked to their advertising-based business models…

Corporate political activity is a highly cross-cutting material issue. Expecting corporate reporting on it is urgent and most welcome. Yet, limiting this push to only five of overall more than seventy business sectors is more than unfortunate. Trailblazing trustees of our savings and investments and the reporting standards that they promote must and can do better.

About the author

Dr. Dieter Zinnbauer is a Marie-Skłodowska-Curie Fellow at CBS’ Department of Management, Society and Communication. His CBS researches focus on business as political actor in the context of big data, populism and “corporate purpose fatigue”.

Twitter: @Dzinnbauer

Essays: https://medium.com/@Dzinnbauer

Working papers:  https://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=1588618


References:

[1] Annotations as extracted from SASB materiality map https://materiality.sasb.org/

Photo by Guido Jansen on Unsplash

When business is not as usual – why companies should engage with humanitarian crises

By Verena Girschik and Jasper Hotho

As evidenced in places such as Syria and Yemen, humanitarian crises are becoming ever more complex (OCHA, 2017a). In response, international and humanitarian organizations increasingly call upon the private sector to help alleviate human suffering. As we describe in our recent article (Hotho & Girschik, 2019), many companies have answered this call. In the past, the role of companies in humanitarian crises tended to be limited to financial or in-kind donations. Today, more and more companies seek a direct role in the delivery of humanitarian action, often through collaborative partnerships with humanitarian organizations. 

Why invest in business-humanitarian collaboration?

Companies that engage in humanitarian initiatives often do so for philanthropic reasons. However, these companies may fail to appreciate that engagement in humanitarian initiatives can also provide them with longer-term strategic advantages (OCHA 2017b). 

To begin with, business-humanitarian collaboration likely has reputational and motivational benefits. Contributions to humanitarian relief efforts send positive signals to external stakeholders, including customers and governments, as well as internal employees. 

However, companies may also benefit in more tangible ways.

First, engaging directly in the delivery of humanitarian assistance can provide firms with the opportunity to learn about new countries and markets. For example, MasterCard’s payment solutions for humanitarian crisis situations allow the company to contribute to a good cause while developing a more detailed understanding of under-explored areas that may at a later stage become potential markets.

In addition, humanitarian engagement provides opportunities for relationship building with international organizations, governments, and local communities. Such connections can enhance a firms’ competitiveness as they may unlock or facilitate interesting market opportunities down the line.

Humanitarian crisis contexts also provide companies with opportunities to develop new skills and competencies or strengthen existing ones. For example, by participating in the Logistics Emergency Team—a business alliance providing UN agencies with vital logistical support—companies such as A.P. Møller-Mærsk have the opportunity to push their logistical capabilities while providing life-saving support during complex emergencies.

Business-humanitarian partnerships must address three fundamental challenges

Notwithstanding the potential of business-humanitarian partnerships, the extreme conditions of humanitarian crises renders such collaboration especially complicated and risky. Humanitarian assistance is often delivered to vulnerable populations in politically complex and volatile contexts. As a result, partners face three fundamental challenges that they need to be prepared to address if they are to leverage the potential of their collaboration.

1.     Securing ethical engagement

The first challenge is to ensure that private-sector involvement is ethically sound and aligned with the humanitarian principles of humanity, impartiality, neutrality, and independence. Companies and their humanitarian partners need to uphold these principles in spite of commercial interests and practical constraints.

2.     Realizing effective engagement

Collaborations between humanitarian organizations and companies are complex to navigate. Partners need to find ways to build mutual understanding and trust and create a favorable climate for mutual problem-solving. In addition, both sides may need to adjust processes and operations in order to align capabilities and enable effective collaboration.

3.     Sustaining business-humanitarian partnerships

Companies and their humanitarian partners often struggle to demonstrate measurable benefits from their collaborations. Companies need to sustain internal support for such partnerships even when there is no immediate business case. In addition, humanitarian organizations need to engage companies in the right place at the right time; namely, where humanitarian needs are greatest.

Addressing these three challenges is neither quick nor easy. It is through strong mutual commitments and innovative responses that business-humanitarian partnerships can leverage their potential and deliver humanitarian assistance ethically, effectively, and sustainably.

References:

Hotho, J., & Girschik, V. (2019). Corporate engagement in humanitarian action: Concepts, challenges, and areas for international business researchcritical perspectives on international business15(2/3), 201-218.

OCHA (2017a). Annual Report 2017

OCHA (2017b). The Business Case: A Study of Private Sector Engagement in Humanitarian Action

About the authors

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)

Jasper Hotho is Associate Professor at the Department of International Economics, Government and Business at Copenhagen Business School, and Senior Editor for the top-tier academic journal Organization Studies. Jasper’s research focuses on the opportunities and challenges that arise from private-sector involvement in the delivery of humanitarian assistance.

Image by  Colourbox.dk

When is a banking scandal a corporate social responsibility scandal?

By Jeremy Moon

I arrived in Australia to discuss and research corporate social responsibility (CSR) with colleagues at RMIT University and the University of Melbourne to see the papers covered in … a banking scandal.

The Westpac Bank product ‘Litepay’, designed to enable customers to transfer small amounts of money overseas, is alleged to have enabled money-laundering on 23 million occasions. It is alleged that 12 customers used this service to transfer $500,000 to child exploitation criminals in the Philippines.

There is the usual background that senior management was aware of the failures but did nothing.  There is the usual foreground that the bank’s leadership made light of the problems, and was strangely slow to accept responsibility.  So far so depressingly familiar.

I also noticed Johannes Leak’s cartoon published in The Australian newspaper (27.XI.2019). OK, it is a caricature with the CSR consisting of activities that seem trivial and causes that, notwithstanding their social significance, are adjacent to the legality and ethics of Westpac’s main business!

But caricature is part of the cartoonist’s craft and it highlights the main message: the way that Westpac went about its business appeared untouched by the department ostensibly standing for its social responsibility. 

So what lies behind this contradiction? 

CSR professionals may well be educated, trained and experienced in other society-related issues.  But as the cartoon suggests they were unable to address some key social impacts of the bank’s business models.  This may be no accident.  It may well suit corporate leadership to have a CSR department to focus on ‘the worthy causes’ and to distract from the business of money-making.  So whilst the CSR staff engage in legitimation activities, the main CSR message (i.e. to serve societal good) is disconnected from conducting the core business. 

So we need to construe CSR as something more pervasive and robust such that it addresses the core business in all its complexity and technicality.  This may mean corporations re-thinking how their products are evaluated, who is around the table at strategy meetings, who leaders listen to, who they collaborate with, what sort of qualifications and capabilities are expected of senior managers and board members.

One positive

One positive in the Westpac story is that the triggers of social sanction operated.  Whistleblowers within Westpac (who advised the media), governmental leaders (who expressed grave disquiet and suspended Westpac from a public policy initiative), and major investors (who threatened exit), brought immense pressure on Westpac’s leadership for more proportionate responses. 

This is a belated success for the main message of CSR: that business needs to be responsible, and that failure here will be very costly. 

Sadly, it comes at a price that investors and customers may have to share. The bank needs to ensure that it has sufficient and appropriate CSR capacity to build the message into the practices of business as usual.


About the author

Jeremy Moon – Director of CBS Sustainability, professor of Sustainability Governance at Copenhagen Business School and BOS blog editor. 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.

By the same author: Wonder Tech and the Institution of Gender

Cartoon’s author

Johannes Leak

Towards a Realization of Sustainability Ambitions?

By Lars Thøger Christensen

Governments are increasingly being sued by citizens and NGOs for not living up to their sustainability ambitions.

Recently, for example, three German farmers along with Greenpeace arraigned Chancellor Angela Merkel’s government for failing to achieve its ambition to reduce Germany’s CO2 emission by 40 percent in 2020, as measured from 1990. Already last year, the government acknowledged that it would not be able to meet its goal. It expects to achieve a 32 percent reduction. The consequences for the farmers, the complainants argue, are dire in terms of long periods of drought and other extreme weather conditions that threaten to destroy their livelihood.

In other parts of the world – including USA, Peru, Colombia and Fiji – similar cases and complaints are arising. It is difficult not to sympathize with these complaints and their underlying concern for our shared planet.

>>It was therefore remarkable that the administrative court in Berlin rejected what was the first climate complaint against the German government.<<

The complainants, the court argued, have no basis for demanding a specific set of actions from the government whose climate protection program 2020 was described as a “political aspiration”. According to German media, the judge said that society needs to respect the executive power’s discretion and room for maneuvering. Understandably, this ruling has spawned lots of criticism.

Governments are currently not legally required to live up to their sustainability aspirations.

This case calls on us to discuss what it takes to make sure that sustainability aspirations are actually being fulfilled by governments as well as by corporations. First, however, we need to consider whether a different decision by the German court – a decision that backed the claims by the farmers and Greenpeace – would have ensured a faster and more certain goal fulfillment. In a short-term perspective, that is quite likely. Although such ruling probably would have been appealed, it would at the same time have applied immense pressure on the government to launch more intense climate initiatives here and now. The more wide-ranging effects of such ruling, however, might not have been in the interest of the sustainability agenda. 

What happens if governments and corporations are legally forced to walk their talk?

Without exonerating empty sustainability talk and lack of sufficient climate initiatives, it is important to acknowledge that governmental and corporate aspirations serve multiple functions in changing and improving existing practices. While sustainability aspirations may be used to impress and seduce voters and consumers, something that is often the case, they are simultaneously likely to shape expectations and mobilize stakeholders to apply pressure for action.

Here, the level of optimal pressure is crucial. If governments and corporations know that unfulfilled promises and aspirations will be met with damaging court cases that support their complainants, they will be less likely to announce ambitious goals, and more inclined to articulate ideals that they already, or almost already, live up to. In such cases, changes may happen slower than society may desire.

>>Conversely, lack of stakeholder pressure is likely to result in “aspirational inflation” or overbidding, thereby reducing the performative power of aspirational talk to instigate changes.<<

Under which conditions should we expect governments and corporations to live up to their own aspirations?

Obviously, the aspirations in question need to engage with salient social, political or environmental issues in order to attract external attention and interest. Most sustainability aspirations are likely to fulfill that criterion. 

At the same time, aspirations need to be bold and challenging in order to mobilize conflicting opinions and critical comments.

Without visionary idea(l)s and without critical attention and interest from stakeholders, aspirations are likely to be soon forgotten or perhaps ignored. Lofty organizational aspirations define a collective horizon of excellence that empowers stakeholders – internal as well as external – to expect and demand better practices. To ensure that the aspirations are taken seriously by all parties, they simultaneously need to be announced in public media of high status. Public announcement communicates the formal status of the ambitions to external audiences but simultaneously signals their authority and truth-value to organizational members. Hereby, they have the potential to stimulate both internal and external involvement and activism. Without such conditions, the German climate protection program 2020 might not even have reached 32 percent of CO2 reduction.

Aspirations need to be visionary, bold and public to mobilize pressure for action.

Obviously, the emphasis on consistency between words and action is important in forcing organizations to take their own words seriously. At the same time, such emphasis might breed a growing fear of criticism – a fear that can lead organizations to restrain their announcement of ambitions in the hope of escaping public attention and scrutiny. This risk is important to keep in mind when deciding how to apply pressure on governments and organizations to honor their own words.

Suggestions for further readings:

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

Font, X., Elgammal, I., & Lamond, I. (2017). Greenhushing: the deliberate under communicating of sustainability practices by tourism businesses. Journal of Sustainable Tourism, 25(7), 1007-1023.

Girschik, V. (2018). Shared responsibility for societal problems: The role of internal activists in reframing corporate responsibility, Business & Society. https://doi.org/10.1177/0007650318789867

Haack, P., Schoeneborn. D., & Wickert, C. (2012). Talking the talk, moral entrapment, creeping commitment? Exploring narrative dynamics in corporate responsibility standardization. Organization Studies, 33(5-6), 815-845.

Kim, E-H., & Lyon, T. P. (2014). Greenwash vs. brownwash: Exaggeration and undue modesty in corporate sustainability disclosure. Organization Science, 26(3), 705-723.

About the Author

Lars Thøger Christensen is Professor of Communication and Organization at the Copenhagen Business School, Denmark

Photo by Ahmed Bibi on Unsplash

Business + purpose = big trouble. But wait, here is one surprising point of agreement

By Dieter Zinnbauer.

Reactions to the recent statement by the Business Roundtable that recognizes a regard for stakeholders rather than a narrow focus on shareholders as a pillar of corporate purpose have been swift, strong and predictably diverse.

They run the entire gamut from enthusiastic embrace (a landmark shift towards a new form of capitalism) to sarcastic dismissal (the usual PR stunt to parry bad press and imminent regulation). Adding to this cacophony is the fact that the frontlines in this longstanding debate do not closely align with political or disciplinary dispositions but criss-cross ideological and scholarly camps.

Some corporate governance experts see just another blatant power grab of unaccountable CEOs, while others believe to witness a much-overdue assertion of responsible corporate leadership and holistic thinking in a complex world. Similarly, stark disagreements run through the advocacy community: some sense an opening for a constructive conversation, while others reject the statements as a distraction and cul-de-sac on the path towards building the economic governance that we really need for a sustainable and inclusive future.

So all has been said and we are left with the usual trenches and irreconcilable viewpoints?

Maybe. But wait – amidst all the quarrels and soliloquies here is one astoundingly consensual point that lots of commentators from very different backgrounds have been making:

>> if companies are serious about good corporate conduct strengthening transparency, responsibility and accountability of their lobbying and other corporate political activity is an essential piece of the puzzle. <<

Consider as illustrative examples these five quotes from influential commentators/organisations:

A corporate governance expert in favour of more, not less shareholder influence:

If the top executives were serious about improving the way their companies are run, what about a commitment to reduce their lobbying and making it more transparent?

Luigi Zingales in Wall Street Journal, August 20, 2019

A non-profit group working closely with progressive corporations:

the statement skirts the issue of the private sector’s role in our societies… Poll after poll shows that the public is deeply upset about the role lobbying plays in Washington… The critiques of capitalism which are being heard across the political spectrum are a natural consequence of the sense by many that the system is deeply unfair and manipulated to benefit the few. This statement does little to address that, and to the degree it is intended to respond to the public challenge to capitalism, it is unlikely to succeed.”

Business for Social Responsibility, website, August 22, 2019

An eminent economist and former senior US government official / chief economist of the World Bank:

“What obligation are roundtable companies now under not to subvert American democracy with campaign contributions or extensive lobbying operations?

Larry Summers in Washington Post, September 2, 2019

An environmental NGO proposes the following as one of “three crucial additions” to move the BRT statement from rhetoric to meaningful action:

“Using corporate brands and political influence to support systemic changes that ensure equitable opportunities for all. This means lobbying for climate-positive legislation and increasing corporate transparency; driving change to move trade associations from lowest common denominator to highest common factor”

World Resources Institute, website, August 22, 2019

 Finally, the assessment of an eminent commentator on business and economics

Members of the Business Roundtable and their peers have tough questions to ask themselves…. They must, not least, consider their activities in the public arena. What are they doing to ensure better laws governing the structure of the corporation… a fair and effective tax system, … and a democracy responsive to the wishes of a broad majority?”

Martin Wolf in Financial Times, September 18, 2019

Perhaps it is just me and a very selective reading of the flood of reactions – as I am just embarking on a European Union-funded research project on corporate political activity and non-market strategy. But I cannot help thinking that this time is perhaps really a bit different. A bewilderingly diverse bunch of opinions from very different backgrounds and perspective appear to hone in on a very specific point of convergence with remarkable regularity: The road towards good and perhaps even better corporate conduct will have to lead through more accountable, transparent and responsible exercise of corporate political activity – irrespective of the model of the corporation and its role in society you subscribe to. Such an unexpected, cross-cutting agreement bodes well for a broad coalition of change and actual shifts in norms, policies and practice.

Back at the Business Roundtable.

The position on corporate political activity has already shown signs of evolving. In 2013 it’s then-president still campaigned on an unrelenting stance that corporations do not and should not even support disclosure of corporate lobbying activities. By 2016 it had begun to acknowledge that the board should assume an oversight role of political activities within the firm and also have the say on disclosure. Still, a long way to go for developing a substantive and meaningful position on responsible corporate political activity attuned to the times. But it will be very exciting to track how this conversation that is so central to any notion of corporate purpose and the role of business in society evolves, both at the Business Roundtable and in the business community more broadly.


About the author

Dr. Dieter Zinnbauer is a Marie-Skłodowska-Curie Fellow at CBS’ Department of Management, Society and Communication. His CBS researches focus on business as political actor in the context of big data, populism and “corporate purpose fatigue”.

Twitter: @Dzinnbauer

Essays: https://medium.com/@Dzinnbauer

Working papers:  https://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=1588618

Photo by Octavian Rosca on Unsplash

Global yet green? How governance influences upgrading opportunities

By Valentina De Marchi.

The fragmentation of production and integration of trade creates important opportunities for firms and territories, especially if located in emerging economies, to grow and learn. Yet not all the global relationships are conducive of economic, social or environmental upgrading.

Upgrading in Global Value Chains

As a result of globalization, value chains are increasingly fragmented and have spread worldwide – a new era of international competition that is reshaping global production and trade and changing the organization of industries has emerged. The Global Value Chain (GVC) framework is particularly useful in understanding global dynamics because it relates the nature of relationships between firms (governance) to the possibilities for firms to move toward higher value-added activities in order to increase the benefits of participations in GVCs (upgrading)[i]. Two main insights can be gained from the extensive literature that, taking especially the POV of emerging countries’ firms and regions, discussed on upgrading:

  1. participating in GVCs represents an important learning opportunity, to acquire crucial knowledge about global markets, advanced processes and global standards;
  2. this opportunity is not always taking place.

When does upgrading take place?

Two major reasons might explain why upgrading does not always occur – and indeed downgrading might even take place. First, learning from the global buyers and lead firms is an opportunity better gained by firms that have the capacity to absorb, master and adapt knowledge that global firms potentially can transfer to them, i.e. have invested in R&D and in the capabilities of their employees, and do interact with local industry associations, universities, research centers to improve innovation capabilities[ii]. Second, that specific path of upgrading and the extent firms can benefit (learn) from GVC participation is heavily influenced by the governance structure that characterize the GVC the firms belong too.

Governance and environmental, social and economic upgrading

A recent quantitative analysis[iii] provides empirical evidence to suggest that a ‘hands-on’ relationship with the key customers (i.e. a relational or captive governance) are conducive of economic upgrading opportunities, yet interesting differences exist if fine-graining to consider product, process or functional upgrading. As far as social upgrading is considered – i.e. the improvement of workers’ rights and work life quality – this is the case also if considering the supplier side of the global network. Interestingly enough, environmental upgrading, instead, is taking place just in the case of relational governance with customers – i.e. in power balanced relationships – and captive with suppliers – i.e. when companies are dependent of few suppliers.

Entering a GVC poses many challenges, but it does represent an opportunity to learn from lead firms and to upgrade. However, every country, community, or company should consider what influence the successful exploitation of the efforts towards economic, social and environmental upgrading has.

About the Author

Valentina De Marchi is Assistant Professor at the Department of Economics and Management ‘Marco Fanno’ at the University of Padova, Italy, and Governing Responsible Business Research Environment (GRB) research fellow at Copenhagen Business School. Interested in circular economy and industry 4.0s and environmental upgrading in GVCs. Valentina has a website and twitter presence.

By the same Author


References

[i] Gereffi G, Fernandez-Stark K (2016) Global Value Chain analysis: a primer. https://gvcc.duke.edu/cggclisting/global-value-chain-analysis-a-primer-2nd-edition/

[ii] De Marchi V, Giuliani E, Rabellotti R (2017) Do Global Value Chains Offer Developing Countries Learning and Innovation Opportunities? Eur. J. Dev. Res. 1–19 https://www.researchgate.net/publication/321695039_Do_Global_Value_Chains_Offer_Developing_Countries_Learning_and_Innovation_Opportunities

[iii] Golini R, De Marchi V, Boffelli A, Kalchschmidt M (2018) Which governance structures drive economic, environmental, and social upgrading? A quantitative analysis in the assembly industries. Int J Prod Econ 203:13–23. https://doi.org/10.1016/j.ijpe.2018.05.021


Image

Photo by Andrew Buchanan on Unsplash.

The year of corporate acting—does business need a new approach to palm oil?

By Amanda Williams, Steve Kennedy and Gail Whiteman.

2018 went down as the ‘year of corporate caring’ about the palm oil controversy. A banned TV advertisement promoting a Palm Oil free Christmas by the UK supermarket Iceland went viral on social media with over 5 million views in merely a couple of weeks. Shortly after, on the south bank in London, Iceland responded to the ban with a displaced Orangutan hanging from a Christmas tree surprising tourists and drawing attention to the loss of biodiversity due to the clearing of virgin rainforests. Debates about palm oil in Malaysia and Indonesia are far from new. But recent events are surely stirring up the conversation and attention to the issue is at an all time high.

Proponents are reacting to the complete ban of palm oil with statistics on the efficiency yields from the fruit of oil palm trees and claim boycotting palm oil would simply shift demand to other types of vegetable oil to meet demand. Palm oil has climbed the charts in popularity because it is cheap, versatile and efficient. While others argue that despite the efficiency benefits of the crop, new approaches are needed to tackle this pressing humanitarian and environmental issue.

Business and Palm Oil

CEOs of multi-national corporations that depend on palm oil and tropical timber in their supply chains are well aware of their impacts and the consequences of deforestation. Outgoing Unilever CEO Paul Polman already stated back in 2015:

“We are seeing the effect of climate change in our own business. Shipping routes cancelled because of hurricanes in the Philippines. Factories closing because of extreme cold weather in the United States. Distribution networks in disarray because of floods in the UK. Reduced productivity on our tea plantations in Kenya because of weather changes linked to deforestation of the Mau forest. We estimate that geo-political and climate related factors cost Unilever currently up to €300 million a year.”

Many companies are working hard to address the issue. The Roundtable on Sustainable Palm Oil, established in 2004, brings together palm oil producers, traders, consumer goods manufacturers, retailers and NGOs to improve environmental and social criteria for the certification of sustainable palm oil. The roundtable boasts that 13.20 million tons of palm oil is RSPO certified, amounting to 19% of the global volume. Palm oil certification is expensive for farmers to obtain and has yet to solve issues of deforestation or poverty.

Yet, ambitious corporate targets are not translating into concrete results on the ground.

Beyond certification, companies are setting ambitious targets. Unilever’s touchstone Sustainable Living Plan aims to become carbon positive by 2030 and halt deforestation by 2020. And Nestle is ‘striving for zero’ environmental impact including emissions and deforestation. Yet, ambitious corporate targets are not translating into concrete results on the ground. Recent reports demonstrate that emissions and deforestation rates are still rising. In advance of 2020, at the Consumer Good Forum, brands admitted that reaching zero deforestation targets by the end of the decade is unlikely. The head of sustainability and procurement at Mars, Barry Parkin, is calling for strategies that go beyond certification that consider “new theories of change.”

Current efforts aren’t cutting it

Despite these ambitious efforts, the situation in Malaysia and Indonesia remains bleak and deforestation continues at alarming rates. In Borneo, only 43 percent of its original lowland rainforests remained by 2015. Lowland rainforests are optimal for palm oil production plants but are also home to many rare species. The consequences of deforestation extend beyond biodiversity loss to land degradation, droughts and forest fires, which interact to further increase emissions.

Even if companies successfully meet ambitious zero deforestation targets, halting deforestation may prevent further increases in emissions, but is unlikely to restore societal and environmental resilience to future shocks. If certification and deforestation targets are not the solution, then what is?

Lessons for business

How can business leaders approach palm oil production differently? Based on our latest article, we offer several suggestions:

  1. Focus on a different scale. Firm-centric approaches, such as mitigation and adaptation to the effects of climate change, may keep companies afloat in the meantime, but are unlikely to offer a long-term solution. Mitigation and adaptation aim to enhance firm performance and respond to the effects of the problem, but do little to consider the eco-systems on which the companies depend. Complex interactions in local societies and ecosystems go unnoticed and leave companies vulnerable to future disturbances. New approaches should consider how to develop healthy ecosystems that can continue to provide services for the local community and companies for decades to come.
  2. Look closer. When considering the intricacies of ecosystems, managers can monitor slow variables and feedbacks. Slow variables such as the amount of soil organic matter, insect populations or the level of rainfall can control how an ecosystem functions. Managers can identify the slow variables that govern how ecosystems behave and what levels of these variables puts the ecosystem at danger. Feedbacks offer managers warning signals that changes are occurring and allow to detect when ecosystems may be at risk. Managers can seek to tighten their recognition and action to feedback loops in order to minimize time delays and improve chances of avoiding ecosystem collapse.
  3. Manage ecosystem diversity and redundancy. Moderate levels of diversity and redundancy allow ecosystems to thrive. When a disturbance strikes, response diversity allows ecosystems to react in numerous ways. Redundancy provides substitute functions when elements that preform similar functions fail. When diversity and redundancy are compromised, ecosystems become brittle and vulnerable to even small disturbances. Firms can move beyond halting deforestation by actively building viable business models for land restoration. For example, effective cropping system diversification can lead to landscape restoration, increased economic viability and enhanced ecosystem resilience.

As companies such as Mars are calling for an overhaul in corporate efforts to tackle deforestation, we hope these lessons offer some inspiration.


Authors

Amanda Williams is a Senior Researcher at ETH Zurich in the Sustainability and Technology Group. She recently completed her PhD from Rotterdam School of Management, Erasmus University. Currently, she is a part of Copenhagen Business School’s Governing Responsible Business (GRB) World Class Research Environment Fellowship program. With Steve Kennedy (Rotterdam School of Management) and Gail Whiteman (Lancaster University) she wrote this blog post and an article on cross-scale perspective for studies of organizational resilience (see below).

Citation:

Williams, A., Whiteman, G., & Kennedy, S. (2019). Cross-Scale Systemic Resilience: Implications for Organization Studies. Business & Society. https://doi.org/10.1177/0007650319825870

By the same author

In November 2018, Amanda Williams has written an article about Corporate contributions to United Nations’ Sustainable Development Goals. Find it right here.


Photo by Marufish on flickr.

We Need To Pay More Attention To Business Associations

By José Carlos Marques.

Despite their key role in both national and international affairs, business associations remain strangely absent from academic discourse, teaching and research on corporate responsibility and sustainability. We clearly need to pay more attention to business associations.

The prominence of business associations

Business associations play an important role in promoting corporate responsibility and sustainability. One need to look no further than the events of recent weeks for evidence of their prominence and influence. At the UN summit in Katowice, Poland, national institutional investor associations – representing some of the planet’s largest asset managers, pension funds, and insurers – sent a clear message to the world’s governments: we need to end fossil fuel subsidies and introduce substantial carbon taxes if we want to avoid both environmental and financial calamity [i].

Recent headlines also point to how business associations may work to inhibit progress. Just before the UN summit began welcoming delegates, a number of fossil fuel trade associations, led by the American Fuel & Petrochemical Manufacturers, were busy lobbying the U.S. government. Their objective? Ensure that the U.S. Senate and Congress kill any hopes of reviving the federal tax credit for electric vehicles (EVs). That’s the same EV credit that helped Tesla grow its market share in the U.S. and is similar to programs that boosted EV usage in numerous other countries [ii]. While the credit program is a tiny fraction of what the fossil fuel industry receives in subsidies, it represents an obvious threat [iii].

Ensure that the U.S. Senate and Congress kill any hopes of reviving the federal tax credit for electric vehicles.

These are just some of the more visible examples of the considerable influence exercised by business associations. Countless other business associations lobby governments, develop self-regulatory programs and engage in a variety of activities that both advance and impede progress on a variety of key social and environmental issues including human rights, labor rights, climate change and inequality. Some have become highly prominent and visible in international circles – take the World Economic Forum (WEF) and the World Business Council on Sustainable Development (WBCSD).

What is a business association?

Business associations are membership organizations composed of, funded, and governed, by firms with shared interests. They represent and defend the interests of their organizational members to outside parties and frequently offer services to their membership base (Schmitter & Streeck, 1999; Lanzalaco, 2008; Barnett, 2013). Associative action is distinct from other forms of business collective action such as alliances, business groups, networks and multi-stakeholder initiatives. It is also one of the most common forms of inter-organizational business activity. There are thousands in the U.S. alone. Every industry and sub-industry has one or several associations and most companies are members of one or several associations – a trade or industry association, a chamber of commerce, an employers’ association, a sustainability coalition, a lobby group, an economic club, etc.

The peril and promise of business associations

As the examples in the introduction illustrate, collective action via business associations can serve multiple ends. In some cases, they operate as special interest groups and rent-seekers whose narrow, self-serving objectives benefit only the industries or coalitions they represent… or even a small subset of member firms within the association. As such, business associations may stall or undermine sustainability efforts and capture regulators and legislators. In these cases, they are detrimental to society and must be countered and contained by markets, governments and social movements (“peril”).

In other cases, their interests are aligned with broader social goals, and as such, they serve as powerful, well-resourced advocates for mobilization and pro-social change. Under certain conditions, business associations may also exert normative pressure upon its membership, mediate member interests, and operate as effective self-regulatory institutions, resulting in beneficial social outcomes (“promise”).

The need for more research

The idea that companies who compete in the economic sphere can also collaborate to address social and environmental concerns has taken hold in both academic and practitioner circles. However, scholarship from various disciplines suggests that achieving the institutional conditions conducive to beneficial social outcomes is difficult and that more research on business associations, and the broader topic of collaboration amongst competitors, is required. Depending on the theoretical grounding and audience, the phenomenon is being addressed under a variety of labels: trade associations, green clubs, meta-organizations, pre-collaborative collaboration, coopetition and self-regulation. Clearly, there is a strong need and there are growing opportunities to address the prominence, peril and promise of business associations.


[i] Carrington, D. (2018, Dec 10). Tackle climate or face financial crash, say world’s biggest investors: UN summit urged to end all coal burning and introduce substantial taxes on emissions. The Guardian. Retrieved from https://www.theguardian.com/environment/2018/dec/10/tackle-climate-or-face-financial-crash-say-worlds-biggest-investors?CMP=share_btn_tw

[ii] Lambert, F. (2018, Nov20). Oil companies officially ask Republicans to kill effort to extend electric vehicle tax credit. electrek. Retrieved from https://electrek.co/2018/11/20/oil-companies-republicans-kill-electric-vehicle-tax-credit/

[iii] Nuccitelli, D. (2018, Jul 30). America spends over $20bn per year on fossil fuel subsidies. Abolish them. The Guardian. Retrieved from https://www.theguardian.com/environment/climate-consensus-97-per-cent/2018/jul/30/america-spends-over-20bn-per-year-on-fossil-fuel-subsidies-abolish-them


The Author

José Carlos Marques is Assistant Professor, Strategy, Corporate Responsibility and Sustainability, at the Telfer School of Management, University of Ottawa, and Visiting Research Fellow (Governing Responsible Business) at the Copenhagen Business School. His research program, at the intersection of strategic management, sustainability and transnational governance, examines the drivers and organizational strategies of inter-organizational coalitions that address social and environmental challenges – these include business associations, multi-stakeholder initiatives and business-state interactions. His work has been published in MIT Sloan Management Review, Organization Studies, Journal of Business Ethics and Journal of World Business.
contact: jc.marques@telfer.uottawa.ca
twitter: @jcmarqz

Bibliography

  • Aldrich, H. E. (2017). Trade Associations Matter as Units of Selection, as Actors Within Comparative and Historical Institutional Frameworks, and as Potential Impediments to Societal Wide Collective Action. Journal of Management Inquiry, 27(1), pp.21-25.
  • Barnett, M. L. (2013). One Voice, But Whose Voice? Exploring What Drives Trade Association Activity. Business & Society, 52(2), 213-244.
  • Buchanan, S. and Marques, J.C. 2017. How Home Country Industry Associations Influence MNE International CSR Practices: Evidence from the Canadian Mining Industry. Journal of World Business, 53(1): 63-74.
  • DiVito, L., & Sharma, G. (2016). Collaborating with Competitors to Advance Sustainability: A Guide for Managers. Network for Business Sustainability (NBS). London, ON. Retrieved from https://nbs.net/p/guide-collaborating-with-competitors-to-advance-sustai-a95dc170-b857-49f4-82ba-42033c09b6cc
  • Grayson, D., & Nelson, J. (2013). Corporate responsibility coalitions: The past, present, and future of alliances for sustainable capitalism. Redwood City, CA: Stanford University Press.
  • Lanzalaco, L. (2008). Business Interest Associations. In G. G. Jones & J. Zeitlin (Eds.), Oxford Handbook of Business History (pp. 293-318). Oxford: Oxford University Press.
  • Marques, J. C. (2017). Industry Business Associations: Self-Interested or Socially Conscious? Journal of Business Ethics, 143(4), 733-751.
  • Nidumolu, R., Ellison, J., Whalen, J., & Billman, E. (2014, April). The Collaboration Imperative. Harvard Business Review. Retrieved from https://hbr.org/2014/04/the-collaboration-imperative-2
  • Potoski, M., & Prakash, A. (Eds.). (2009). Voluntary Programs: A Club Theory Perspective. Cambridge, MA: MIT Press.
  • Rajwani, T., Lawton, T., & Phillips, N. (2015). The “Voice of Industry”: Why Management Researchers Should Pay More Attention to Trade Associations. Strategic Organization, 13(3), pp.224-232.
  • Schmitter, P. C., & Streeck, W. (1999). The Organization of Business Interests: Studying the Associative Action of Business in Advanced Industrial Societies – MPIfG Discussion Paper 99/1. Cologne, Germany: Max-Planck-Institut.

Photo by Sebastian Bednarek on Unsplash.

Current issues in Business and Human Rights: report from the 2018 Annual Forum in Geneva

By Karin Buhmann.

‘Building on what works’ was the key topic for the annual Forum on Business and Human Rights that took place in Geneva on 26. to 28. November. With more than 2000 participants, the Forum has become the world’s largest gathering of practitioners, academics, civil society, governments and just about anyone else with an interest in the field of business and human rights. The sessions were streamed online, making the Forum accessible also for those not able to attend in person in Geneva.

Now in its seventh year, the Forum is organized by the United Nations (UN) as a multi-stakeholder event to take stock of and advance the implementation of the UN Guiding Principles on Business and Human Rights (UNGPs), and to discuss other issues related to this fast-evolving field. The UNGPs build on three ‘pillars’:

  1. The state duty to protect human rights against infringements caused by companies;
  2. the corporate responsibility to respect human rights; and
  3. enhanced access to remedy for victims of business-related human rights infringements.

Each year’s Forum has a special topic, and the Forum is organized to seek to involve relevant stakeholders in bringing relevant issues, dilemmas, challenges and opportunities to the foreground. It is intended to help building knowledge of how companies, governments, civil society and others can help advance business respect for human rights.

Prior to the 2018 topic, for example, the 2017 Forum addressed the issue of ‘access to remedy’, and previous Forums have addressed, for example, leadership and leverage in regard to human rights in the global economy. Some topics are recurrent at the Forums, such as the role of institutional investors, and the implementation and effectiveness of human rights due diligence.

’What works’ and how human rights impact on the economies of companies

In line with the ‘What works’ topic, this year’s Forum featured a special ’snapshot’ track. Here, a large number of individual companies and managers took turns to share their experience on their work to advance the corporate respect for human rights in their own organisations, in their value chains, and with stakeholders. Other tracks featured, for example, the connection between climate change and business responsibilities for human rights; and debates on the human rights implications of the tech-industry, ICT and artificial intelligence. Reflecting other debates during the past year, human rights issues highlighted in the ICT and AI contexts included risks to privacy, the freedoms of communication and information, free and fair elections, and jobs. Increasing attention is also paid to human rights and sports, for example in regard to mega-sporting events and related construction projects, such as those for the 2022 FIFA football world cup in Qatar.

Not surprising, from an academic perspective one might sometimes wish for a broader discussion that could engage more with the strategies adopted and help challenge managers to further deepen their efforts to respect human rights. However, the ‘snapshot’ presentations along with the many other sessions jointly did confirm the extensive and important implications of human rights for many core business activities and areas: the Forum’s tracks and debates confirmed that human rights issues are increasingly significant in relation to business communication, due diligence and risk management, human resources and labour, supply chain management, finance, public procurement, non-financial reporting and beyond.

For example, the expansion on mandatory non-financial reporting in the EU and elsewhere that has taken place in recent years is strongly connected to and related to the development of the risk-based due diligence approach that is at the core of the UNGP. However, there is a persistent risk that regulators’ emphasis on formal disclosure after an activity takes place, results in too limited focus on preventing harm before or during an activity.

Academic networking

Aiming to benefit from the presence of a large number of individuals from regions around the world, several academic events take place at the Forum or, particularly, back-to-back with it. Advancing teaching and research on business and human rights was the topic of a half-day meeting at the University of Geneva, featuring a multi-disciplinary group of scholars and universities from many countries.

Organised by the CBS-hosted BHRights Intiative for Interdisciplinary Research and Teaching on Business and Human Rights (BHRights), a global research workshop gathered 25 scholars presenting their research on various topics of business and human rights. The presentations covered a range of very diverse topics, such as for example what national institutional factors condition business respect or dis-respect for human rights, corporate reporting on business and human rights in various countries, dilemmas around socially responsible green transitions, the rights of nomadic Sami reindeer herders, and the prospective international treaty on business and human rights.

UN Forum 2018 – Roundtable: Academic Networks in Conversation with Stakeholders (KB).

For the first time, the Forum organisers decided to include a specific session for various academic networks on business and human rights. Jointly organized by some of these networks, the session prioritized interaction with stakeholders from business, civil society and other organisations to stimulate mutual collaboration and understanding of the connections between theory and practice of business and human rights.

The 2019 Forum is currently scheduled to take place in late November 2019. Registration is expected to open in mid-2019.

The Author

Karin Buhmann is professor at Copenhagen Business School where she is charged with special responsibilities in business and human rights. Appointed by the Danish Minister of Commerce upon nomination by Danish Civil Society, she is also a member of the Danish National Contact Point to the OECD set up under the OECD Guidelines for Multinational Enterprises. Professor Buhmann was a member of the Danish delegation to the 2018 UN Forum.

Trusting Nudges?

By Lucia Reisch.

Policy makers all over the world increasingly choose nudges from the toolbox to combat challenges of society including public health and the environment. However, when we embrace nudges we should not only consider their benefits for society. We should also ask: Do people approve of using them, and why?

Nudges cover different interventions that steer people in certain directions. They can be everything from warnings on tobacco products to defaults for green energy. What is important: A nudge always allows people to choose themselves – and to opt out of a default. The approval of nudges is the focus of my new article written with co-authors Cass Sunstein and Micha Kaiser, recently published in the Journal of European Public Policy. Our analysis draws on an international survey from five countries: Belgium, Denmark, Germany, South Korea and the US. We asked a representative group of people in these countries if they approve of 15 widely used health and environmental nudges. We also checked for a long list of socio-economic, psychological, and social variable – including their trust in public institutions.

Most people do

A high level of support for nudges exists across countries and cultures. This is what we had found in earlier studies in about 25 countries worldwide. Yet differences in attitude show up across various beliefs, traits, and behaviours. Women and people with marked environmental concern are most likely to approve. At the same time, conservatives are less likely to do so. We see the force of behaviour when, for instance, a “meat-free Monday” in a cafeteria is less well supported by meat-eaters. Interestingly, this also applies to smokers who tend to disapprove of government anti-smoking campaigns.

Nudging from “above” requires trust from the base.

Trust is a must

While our analysis points to several findings, one might outshine the others. Approval comes with trust. To be more specific, we find the trust in public institutions strongly connected with social approval. In other words, when people have high trust in, e.g., government or police, they are likely to be supportive towards nudges. As expected, those who strongly believe in the free market to solve challenges of society will be less in favour.

Openness and transparency

The finding of trust gives a very important lesson. We should make sure to cultivate trust in arguing for nudges. Even though most people already approve of nudges, policy makers should not rest on their laurels but rather engage citizens in the development of new policies and ways of assessing their cost-effectiveness and acceptance. The best way to obtain trust is to earn it, and to invite citizens to participate. This is why we propose a “bill of rights for nudging” that sketches out the rules a government should follow when using nudging as a policy tool. Transparent rules and processes tend to create trust in institutions.

Author

Lucia A. Reisch is Full Professor for Consumer Behaviour and Consumer Policy at Copenhagen Business School.

Full article

Cass R. Sunstein, Lucia A. Reisch & Micha Kaiser (2018): Trusting nudges? Lessons from an international survey, Journal of European Public Policy, DOI: 10.1080/13501763.2018.1531912


Images

Header photo: a trash bin in Copenhagen.
Photo by Bernard Hermant on Unsplash.

Feeling the Pain

By Robin Porsfelt.

While the recent US ’opioid crisis’ has been widely reported, a second, less recognized, crisis related to opioids has been taking place, and is still ongoing, more quietly in countries with less Western media visibility. Whereas the crisis in the US is arguably related to an over-subscription to opioid-based pain relief, such as OxyContin, the second crisis could rather be seen as a case of too tightly regulated access to opioids in health-care systems. This is at least the argument of a recent report commissioned by The Lancet which proclaims that the world is experiencing an under-management of pain where as many as 25 million people are suffering partly as a result of regulatory and cultural approaches to the use of opioids.

Severe lack of access

The report was the result of a three-year study on the integration and access of pain relief and palliative care in health systems. It opens with a succinct description of the problem: “Poor people in all parts of the world live and die with little or no palliative care or pain relief. Staring into this access abyss, one sees the depth of extreme suffering in the cruel face of poverty and inequity” (Knaul, Farmer & Krakauer et al, 2017: 1).

Those suffering from lack of access to adequate medication are predominantly found in low-income and middle-income countries, often with terminal illnesses, and includes approximately 2.5 million children dying with, what the report terms, ‘serious health-related suffering’ each year (Knaul, Farmer & Krakauer et al, 2017: 2). Of the almost 300 metric tons of morphine-equivalent opioids distributed annually, only 0.1 metric tons reach health systems in low-income countries. This is something the report’s authors condemn as: “a medical, public health, and moral failing and a travesty of justice” (Knaul, Farmer & Krakauer et al, 2017: 1).

Addiction and pain relief

But what are the reasons for this state of potentially unnecessary suffering? In contrast to many other debates on access to medication, the problem is in this case not predominantly related to questions of scarcity, costs, or tightly enforced intellectual property rights to drugs, but rather a mix of cultural and regulatory factors. There are (at least) two factors that explain the pattern: One is a lack of visibility due to fragmented patient advocacy and exclusion of pain alleviation from standard measures of health. Another key factor is that opioids do not only fall under the scope of medical regulation but are also controlled substances under international drug conventions (Ibid.).

As substances such as morphine are listed and regulated as narcotic substances by the UN, they become part of a machinery of international checks and balances on their flow, including import quotas and reporting requirements. The UN treaties are based on two imperatives, on the one hand the limitation of harmful and addictive substances, and on the other hand to secure access to medically vital analgesics.[1] In recent decades, the war on a drugs-compatible first imperative of strict control has become increasingly dominant, making such medication harder to access (Knaul, Farmer & Krakauer et al, 2017: 8).

A second related issue suggested by the report is ‘opiophobia’, described as prejudice and misinformation concerning medical use of opioids. Whereas a balanced approach to opioid prescriptions is needed, a prevalent fear of non-medical use and its side-effects among health-care providers, regulators, and patients have led to an underestimation of needs and insufficient medical use in many countries (Ibid.).

What’s to be done

Even though this inequity in pain relief is indeed under-acknowledged, potential solutions should at least, in theory, not be gridlocked by economic interests. As morphine and morphine-like medication is cheap to produce and commonly used in Western medical systems, the problem is rather about framing and contesting stigmatization. While acknowledging the risks with a too laissez-faire approach, there is a need to recognize the value in a controlled medical use of opioids to avoid unnecessary suffering as well.

A way to do so, as the report highlights, would for instance be a broadening of the third Sustainable Development Goal (SDG) on ensuring healthy lives and well-being for all. Currently, the battle against substance abuse is covered in the SDG target 3.5, a step forward however would be to include pain alleviation and access to pain relief as similarly essential objectives – for instance as part of SDG target 3.8 on universal health coverage. As a measure, this is of course not enough, but at the current stage, and given the documented ‘abyss’ of equity in pain treatment worldwide, simply diagnosing the issue as problematic per se would to some degree seem like progress.

 

[1] A member of a group of drugs to achieve analgesia, i.e. relief from pain. (editor’s note)

References

Knaul, F. M., Farmer, P. E., Krakauer, E. L., et al. (2017). Alleviating the access abyss in palliative care and pain relief––an imperative of universal health coverage: The Lancet Commission report. Lancet. DOI: 10.1016/S0140-6736(17)32513-8


Robin Porsfelt is a PhD fellow at the Department of Management, Society and Communication. He is part of a PhD cohort on time and societal challenges, with particular research interests in the sociology of valuation and global governance

Photo by rawpixel on Unsplash.

A framework for assessing the potential of behaviour change for global decarbonisation

By Kristian Steensen Nielsen

Addressing climate change requires an urgent implementation of far-reaching solutions. Policy-makers and natural scientists have mainly offered supply-side solutions to solving the climate problem, such as widespread adoption of new or innovative technologies. While of critical importance, strictly prioritising supply-side solutions is unlikely to deliver the necessary greenhouse gas (GHG) emissions reductions within the desired time frame. An often-overlooked demand-side solution is behaviour change, which can offer both immediate and long-term reductions in GHG emissions.

There is an urgent need for rapid decarbonisation to reduce the magnitude of climate change. The Paris Agreement reflected this urgency in its formulation of ambitious goals to keep the global temperature increase below 2°C and preferably 1.5°C. Since the Paris Agreement, researchers—often affiliated with the Intergovernmental Panel on Climate Change (IPCC)—have with accelerated frequency been building scenarios for potential pathways to reach the temperature goals.[1] These far-reaching—and arguably radical—pathways involve urgent transitions to renewable energy sources and the majority assumes the use of carbon dioxide removal (CDR) technologies, such as afforestation or bio energy with carbon capture and storage (BECCS). Neither of the pathway scenarios take behavioral changes into account despite the fact that studies have shown its potential to reduce GHG emissions. For example, Thomas Dietz and colleagues (2009) found that a national implementation of behavioural changes in the United States could reduce U.S. households’ direct emissions by 20% within 10 years (representing 123 million tons of CO2). Although not sufficient single-handedly, behaviour change can help speed up the decarbonisation of societies.

 

Three dimensions of behaviour change

To identify the potential of behavioural changes to reduce GHG emissions, it is critical to consider three dimensions[2]:

  1. the technical potential (TP) of a behaviour, or the emissions reduction achieved if an individual or a target population collectively adopted the behaviour;
  2. behavioural plasticity (BP), or the proportion of the technical potential achievable through the most effective behavioural interventions; and
  3. feasibility of initiatives (IF) to induce change, which refers to the likelihood that the most effective interventions are achievable within a target population.

Focusing exclusively on either of the three dimensions will result in skewed analyses from which only imperfect interventions can be developed. For example, substituting a GHG-intensive behaviour with a less GHG-intensive alternative (e.g., flying to Bermuda on vacation versus vacationing in one’s own country) will promise a high TP but the extent to which people are willing to make such a behavioural substitution may be less promising (BP) and so might the feasibility of achieving the behavioural change across a large population (IF). Conversely, a behaviour could be easy to change (e.g., getting people to shut off lights in unoccupied rooms) and feasibly be implemented in a large population, yet hold a very low TP and therefore even in the aggregate fail to reduce emissions by much.

Identifying the most promising target behaviours

The task of researchers (across disciplines) in collaboration with policy-makers and companies is to identify the behaviours with the highest potential to reduce GHG emissions while considering all three dimensions in cohesion. Making such calculations is no easy task—as the dimensions may vary substantially between and within countries—but neither is adopting innovative technologies at a massive scale. However, focusing on both supply- and demand-side solutions will heighten the likelihood of achieving the Paris goals.

[1] Rogelj et al., 2018.

[2] Dietz et al., 2009; Vandenbergh & Gilligan, 2017.

 

References

Dietz, T., Gardner, G. T., Gilligan, J., Stern, P. C., & Vandenbergh, M. P. (2009). Household actions can provide a behavioral wedge to rapidly reduce US carbon emissions. Proceedings of the National Academy of Sciences106(44), 18452-18456.

Rogelj, J., Popp, A., Calvin, K. V., Luderer, G., Emmerling, J., Gernaat, D., … & Krey, V. (2018). Scenarios towards limiting global mean temperature increase below 1.5° C. Nature Climate Change8(4), 325.

Vandenbergh, M. P., & Gilligan, J. M. (2017). Beyond Politics. Cambridge University Press.


Kristian Steensen Nielsen is a PhD Fellow in environmental behaviour change at Copenhagen Business School. His research interests are self-control, behaviour change, and environmentally significant behaviour.

 

Pic by Duncan Harris, Flickr.

Big fuss about a big policy plan – and why this matters for corporate social responsibility: the Chinese social credit system

By Dieter Zinnbauer & Hans Krause Hansen.

Few statist policy blueprints on matters pretty technical have captured our collective imagination as has the Chinese Social Credit System (SCS). Announced by China’s State Council on June 14, 2014, and building on experimentation with related mechanisms since the early 2000s, it sets out a hugely ambitious effort, officially described to instil societal trust, integrity and cohesion in a highly complex society. To get there it seeks to combine cutting-edge technology and vast amounts of data to create incredibly granular behavioural profiles of both companies and individuals. Good and bad behaviours are meant to be recorded in and through elaborate rating systems and blacklists, and made public on digital platforms. The expectation is that punishments and rewards will deter deviance and incentivise good conduct in close to any sphere of life.

With the West in the mirror

After years of relative in-attention, the SCS has loudly burst onto the Western media landscape. Here, it is typically described in Orwellian terms as a totalitarian system of surveillance and control. On closer inspection, the SCS is in fact embryonic, fragmentary and faced with enormous implementation challenges.

But the scale, scope and level of invasiveness associated with the data collection effort currently emerging in China should not look so shockingly unprecedented to Western publics once they begin to scrutinize their own backyards. Take the use of social media in the policing of protests as an example. Here the UK government engages in the analysis of big data to predict, pre-empt and respond in real time to a range of issues, including public dissent. Take information on someone’s physical whereabouts as another example. As it turns out the exact location of cell phone owners in 95% of the US is being tracked with the help of all major carriers in close to real time (ok, with a 15 seconds delay) and related data is being available to nudge people’s behaviour for a wide variety of purposes, e.g. by sending them last-minute campaign pitches when they wait in line outside a particular polling station or anti-abortion messages when they are found to linger outside health clinics that carry out these procedures or by sending political messages when they wait in line outside a particular polling station.

Or take the most popular new media companies. They are collecting extremely granular dockets of what their users do, say and who they socialise with on their own platforms. But less in the spotlight they also track users and non-users alike across millions of other websites and across the bulk of the most popular mobile applications, recording anything from detailed surfing behaviour down to the modes of movement – is the user currently cycling or on the train? What’s more, they increasingly merge theses profiles with billions of data points collected by other parties. One leading new media company claims to have access to information on 70% of all credit card purchases and thus approximating a rather totalitarian 360 degree, 24/7 view of user conduct, all the way to – no kidding – the barometric pressure of the users’ environment.

Public and private entanglements

A special matter of concern in the West relating to SCS is its fusion of socialist government and private sector capabilities, technical affordances and interests that make such a system feasible in the first place.

However, long gone in the West are the times when governments were the main purveyors and guardians of data about their citizens.  Even the holy grail of state information prowess, the census is not immune to private sector resources and influences. The UK government for example is exploring ways to make its census more cost-effective with the help of other big data sources and acknowledges that this will also have to include privately-held ones.

And there is also a proximity of big tech and political actors on a much more fundamental level. Tech companies evolved into some of  the most vocal and most prolific donors and lobbyists on the political scene. An entirely legitimate democratic engagement, but it raises questions about outsize influence given the scale of these efforts. Yet, much more unnerving, the leading social media and tech companies in the US   seconded staff as pro-bono experts to become part of the support teams of most presidential candidates in the run up to the 2016 presidential elections, giving them unique insights and connections into the affairs of some of the leading politicians in the country.

Subtle social sorting and weak institutional safeguards

A factor that explains the extraordinary attention that the SCS has received might pertain to the breadth of sanctions and consequences that these early uses have already resulted in. Bad social credit makes it more difficult for Chinese citizens to travel, find a home or get a job.  Unfortunately, this is nothing new and happens all over the world.  Under the label of risk- management citizens whose criminal record or financial credit history contains some irregularities have long been subjected to inferior treatment when renting a home, looking for a job or seeking insurance.

In principle, the protection of individual rights and limits on state over-reach and surveillance in most western countries relies on a host of elaborate institutional safeguards, checks and balances. While some of the egregious examples referenced above have actually been remedied when they were exposed, thus attesting to some degree of efficacy of legal and broader societal protections, other incidences have not been resolved and are somehow even seen as acceptable.

So shifting some of the attention and moral outrage that is being directed towards the Chinese SCS back to the home turf, and to investigate what troubling data practices and regulatory gaps that are germinating over here is more than warranted. In the wake of the Facebook and Cambridge Analytica scandals this has begun to happen and more commentators are noting the troublesome parallels between Chinese SCS and emergent data surveillance and discrimination issues in the West.

Enter the urgent business of business

And this is where business and its social responsibility comes in. Because one of the fundamental differences between the SCS and many issues in the West is that the disciplinary power, control functions and discriminatory implications of big data-driven social scoring are not primarily organised and instrumentalised through government, but deployed by the private sector and working their way into everyday lives.

Egged on by a growing populist Tech-lash, a whirlwind of new regulatory efforts and undoubtedly also in many cases by a deeper sense for doing no harm, the new tech companies have begun to take note, moving from denial to a gradual re-examination of some of their working principles, practices and normative anchoring.

Yet, the proof is still in the pudding whether this is a substantive change of minds and hearts. The Performance of the new tech sector on some standard measures of corporate integrity and transparency is still mediocre and lagging many other established industries.

The ways to a much more comprehensive, proactive and transformational integration of corporate social responsibilities into the strategy and practice of tech will have to coalesce around a broad band of issues, ranging from responsible stewardship of data, platform power and emergent artificial intelligence capabilities to bread and butter CSR issues such as responsible corporate political activity and supply chain and subsidiary integrity.

Think tanks and tech activists are putting forward a sprawling pool of ideas and initiatives from data collaboratives or privacy by design standards to high-profile research endeavours into artificial intelligence ethics. Meanwhile  European regulators are putting into force trailblazing rules as we write this column.

But a big tech embrace of a substantive and comprehensive notion of corporate social responsibility is urgently required to stave off the threat of an even more populist, illiberal, unequal, misogynistic and fragile future in which the tech industry is more part of the problem than a solution to it.


Dieter Zinnbauer is Governing Responsible Business Research Fellow at Copenhagen Business School in the Department of Management, Society and Communication.

Hans Krause Hansen is Professor at the Department of Management, Society and Communication at Copenhagen Business School. He teaches and researches about various aspects of public and private governance, including corruption, anti-corruption and transparency regimes in the global North and South.

 

Pic by Alias, Flickr.

‘Just Sustainabilities’ in a World of Global Value Chains

By Stefano Ponte.

What if we used our size and resources to make this country and this earth an even better place for all of us: customers, Associates, our children, and generations unborn? What if the very things that many people criticize us for—our size and reach—became a trusted friend? 

Excerpt from ‘Leadership in the 21st Century’, speech by Lee Scott, then CEO of Walmart, Bentonville, Arkansas, 24 October 2005 (as in Humes 2011: 102)

Whenever we engage in consumption or production patterns which take more than we need, we are engaging in violence.

Vandana Shiva, Earth Democracy: Justice, Sustainability, and Peace (2016: 102)

A New Era

Human activity is having major impact on the earth and its biosphere, to the point that geologists have now defined a new era – the Anthropocene – to reflect this phenomenon. For some, this is a period that started in the late 18th century with a marked increase in fossil fuel use, and that has accelerated dramatically since the middle of the 19th century. During this time, human action has overshadowed nature’s work in influencing the ecology of the Earth. Global sustainability crises, such as climate change, the acidification of oceans, and the ‘sixth great extinction’ of planetary life characterize this period of great turbulence in the relation between humanity and nature.

Others question the focus on humanity as an undifferentiated whole in the term ‘Anthropocene’, and propose a different term to explain the same result: Capitalocene, ‘the era of capitalism as a world-ecology of power, capital and nature’ (Moore 2016: 6). This term shifts focus away from the putative duality of human-nature relations and towards capitalism as a way of organizing nature. From a Capitalocene perspective, major changes in the world-ecology started taking place already in the mid-15th century – with a progressive transition from control of land as a way to appropriate surplus value, to control of land as a way of increasing labour productivity for commodity production. In other words, it is not enough to simply examine what capitalism does to nature and how humanity can solve global sustainability challenges through innovation in technology and business models. We need to conceptualize power, value and nature as thinkable only in relation to each other.

Sustainability Management

In addition to cost, flexibility and speed, sustainability management has become another key element of contemporary capitalism. The practices that corporations enact to address sustainability issues are also (re)shaping the existing spatial, organizational and technological fixes that are needed to ensure continuous capital accumulation.  Geographically, production is moving to locations that can meet basic sustainability specifications in large volumes and at low cost; organizationally, multi-stakeholder initiatives on sustainability have come to play a key role in global value chain (GVC) functioning; labour conditions among suppliers are under pressure from the need to meet increasing environmental sustainability demands from lead firms; and the need to verify sustainability compliance has led to the adoption of new technologies of measurement, verification, and trust.

The ‘business case’ for sustainability has been by and large solved – lead firms do not only extract sustainability value from suppliers, but also benefit from internal cost savings, supplier squeezing, reputation enhancement and improved market capitalization. As the value of goods increasingly depends on their intangible properties (including those related to sustainability) than on their functional or economic value, sustainability management becomes a central function of corporate strategy – filtering through organization, marketing, operations and logistics. Lead firms in GVCs are leveraging sustainability to extract more information from suppliers, strengthen power relations to their advantage, and find new venues of value creation and capture.

The business of sustainability is not sufficient as a global solution to pressing climate change and other environmental problems. It is doing enough for corporations seeking to acquire legitimacy and governance authority. This legitimacy is further enhanced through partnerships with governments and civil society groups. Some of this engagement is used strategically to provide ‘soft’ solutions to sustainability concerns and to avoid more stringent regulation. While the business of sustainability is leading to some environmental improvements in some places, and better use of resources in relative terms in some industries, the overall pressure on global resources is increasing. The unit-level environmental impact of production, processing, trade and retail is improving. But constantly growing consumption, both in the global North and in the global South, means that in the aggregate environmental sustainability suffers.

What To Do

Public actors at all jurisdictional levels need to put in place orchestration strategies that improve the actual achievement of sustainability goals, and activists and civil society groups should identify and leverage pressure to strengthen the effectiveness of orchestration. But these strategies have to be informed by the realities of the daily practices, power relations and governance structures of a world economy that is organized in global value chains. Orchestration is more likely to succeed when a combination of directive and facilitative instruments is used; when sustainability issues have high visibility in a global value chains; when the interests of private and public sectors are aligned, and when orchestrators are aware of the kinds of power that underpin the governance of value chains and act to reshape these power configurations accordingly.

A path towards ‘just sustainabilities’ means addressing inequality – since it drives competitive consumption and leads to lower levels of trust in societies, which makes public action more difficult; it entails focusing on improving quality of life and wellbeing, rather than growth; it demands a community economy and more public consumption; it involves meeting the needs of both current and future generations and at the same time reimagining these ‘needs’; it demands a paradigm of ‘sufficiency’, rather than maximization of consumption; it recognizes that overconsumption and environmental degradation impacts on many people’s right to enjoy a decent quality of life; and it requires a different kind of ‘green entrepreneurial state’, which also caters to these needs. Just sustainabilities necessitate building a social foundation for an inclusive and stable economic system that operates within our environmental planetary boundaries; and it demands business to behave responsibly (within its organizational boundaries and along value chains) to maintain its social license to operate.

This text is based on excerpts of Stefano Ponte’s forthcoming book Green Capital, Brown Environments: Business and Sustainability in a World of Global Value Chains, Zed Books: London. The book is based on 20 years of research on sustainability and global value chains, and builds from empirical work on several agro-food value chains (wine, coffee, biofuels) and capital-intensive industries (shipping and aviation).

Stefano Ponte is Professor of International Political Economy in the Department of Business and Politics, Copenhagen Business School and the former academic co-director of the Sustainability Platform at CBS. Twitter: @AfricaBusPol


Selected books for further reading on this topic:

Agyeman, J. 2013. Introducing just sustainabilities: Policy, planning, and practice. Zed Books.

Dauvergne, P. 2016. Environmentalism of the Rich. MIT Press.

Humes, E. 2011. Force of nature: The unlikely story of Wal-Mart’s green revolution. HarperBusiness New York.

Jackson, T. 2009. Prosperity without growth: Economics for a finite planet. Routledge.

Moore, J. 2016. Anthropocene or Capitalocene? Nature, history, and the crisis of capitalism. PM Press.

Shiva, V. 2016. Earth democracy: Justice, sustainability and peace. Zed Books.

 

Pic by Marufish, Flickr.

CSR: When High Aspirations Go Low – and How to Avoid it

By Peter Winkler & Michael Etter.

Managers’ public claims to improve CSR can have self-persuasive effects on corporations and their members. However, sometimes such “aspirational talk” can have the opposite effect. We explain why this may happen and how to avoid it.

“Green washing” or “smoke and mirrors” are labels that are often attached to the promises of managers who publicly claim to improve CSR. CBS researchers have challenged this sceptical view and argue that “aspirational talk” by managers, by raising public expectations and scrutiny, can make corporations and their members live up to these aspirations.

Sometimes, however, we argue that even the best-intended aspirations can have opposite, even detrimental effects. In the following we provide some reflections on the conditions, under which high CSR aspirations may “go low” and we suggest some ideas how to prevent such outcome.

From persuasive to provisional aspirations
Aspirations are helpful to direct and motivate employees. However, the last thing managers need on a mission towards substantial corporate responsibilisation are “blind believers”. Employees, who simply rely on a visionary manager and do not voice, where current business conduct impedes aspired CSR, will contribute little to change. Hence, we propose that managers should avoid getting too persuasive and creating “corporate cultism” around aspired CSR. Rather, managers should signal that visions are provisional and that employees, who critique contradictions between vision and reality, are the true driver of change.

From insistent to revisable aspirations
We suggest that managers should not stick too closely to their initial CSR aspirations. As innovation research tells us, insistence on initial ideas is never a good advisor to affect change. In contrary, managerial insistence on initial CSR aspirations may prevent that different ideas about future CSR by employees develop. Hence, managerial willingness to revise their aspirations in accordance to what employees consider responsible practice is crucial. After all, it is the employees who enact CSR in their daily work.

From broad to locally grounded aspirations
Aspirations, by nature, have a bias when it comes to envisioned scope and gravity. Dreams are larger than life. On a managerial mission towards better CSR, hence, the goal cannot, and maybe should not be to live up to managerial ideas. Rather, we suggest that corporate responsibilisation is about local grounding and depth of CSR in situated understandings and practices. In other words, CSR is less a question of reaching an aspired scope, but about winning depth and grounding in corporate practices.

Our ideas should by no means discourage managers to think big and speak out about CSR. However, we suggest that voicing CSR aspirations is only the first step. In a second step, managers might need to modify or sacrifice these aspirations for locally committed CSR practices.


Peter Winkler is a FH professor at the FHWien der WKW – University of Applied Sciences in Management and Communication, Vienna, and guest professor in organizational communication at the University of Salzburg, Austria. He is interested in sociological approaches to organizational and management communication research. In 2015/16, he was a research fellow at the Governing Responsible Business Research Environment at CBS.

Michael Etter, Ph.D., is a Marie Curie Research Fellow at Cass Business School, City University of London. He is interested in CSR, new ICTs, and social approval of firms. He tweets about media, technology, and business & society issues @MichaelEtter_.

Pic by Nick Fewings, Unsplash.

The Ethical Blindness of Corporate Sustainability

By Andreas Rasche.

Corporate sustainability (and related concepts like ESG and materiality) have been reduced to discussions around financial value. This makes these concepts “ethically blind”. We are in need of a resurgence of business ethics, otherwise the endless discussions of the “business case” for sustainability will turn out to be the error at the heart of true leadership for sustainable business practices.

My LinkedIn and Facebook feeds are filled with great stories about how well corporate sustainability aligns with financial measures (be it revenue, profit or another metric). Sustainability practitioners seem to love these research findings. No one can blame them. They are the ones who need to “sell” sustainability efforts to top management, and having evidence that sustainability aligns well with financial goals makes this task a lot easier. I do not necessarily doubt these findings, although any researcher will tell you that results always depend on how a study is built, and also that correlation and causation are often confused in these studies.

What I am concerned about is that research findings are turned into normative prescriptions without much reflection: just because some research finds that corporate sustainability efforts support the financial bottom line of a company, we should not conclude that these efforts should only be undertaken whenever they support the financial bottom line. Corporate sustainability is most urgently needed whenever it does not support the financial bottom line. In those situations, the decision for sustainability is a tough one; it requires courage and, in many cases, ethical reflection.

Future thinking, writing, and speaking about corporate sustainability needs to much better balance the financial gains and the moral dilemmas attached to relevant issues. Otherwise, we risk to become ethically blind. Such blindness is often referred to as the “inability of a decision maker to see the ethical dimension of a decision at stake.” (Palazzo et al., 2012: 325) Practitioners’ and academics’ obsessions with the business case has clearly diminished our ability to turn a problem/issue into a case for moral reflection and imagination.

A good example are materiality assessments. These assessments rank ESG issues according to their influence on a firm’s strategy (incl. financial bottom line) and the interest of the firm’s stakeholders in these issues. The moral need to address an issue, because it is the right thing to do, falls off the agenda. Corporate sustainability becomes a pick and choose exercise, which corporations often frame in whatever way they please.

The field, which we nowadays refer to as corporate sustainability (incl. ESG and materiality etc.), started out with discussions around the moral responsibility of businessmen. Back then the focus was, among other things, on how moral dilemmas can be resolved. I am not saying these are the good old times. But it is clear that the discourse has not only changed label (from ethics to responsibility to sustainability), but also that this very discourse has been hijacked by the belief that corporate sustainability is only a worthwhile endeavour whenever it creates financial value for a company.

All of this is not to say that corporations should not financially profit from their corporate sustainability efforts. It is also not to say that managerial tools like materiality assessment are completely useless – they can be of great help. However, it is to say that we cannot and should not reduce discussions around sustainability to a single dimension: be it the financial one, the moral one, or any other one. Corporate sustainability issues are by design multi-faceted, and so must be our thinking about them.

Former CEO of General Electric, Jack Welch, once famously declared:

On the face of it, shareholder value is the dumbest idea in the world. Shareholder value is a result, not a strategy …your main constituencies are employees, your customers and your products” (quoted in Moon, 2014, p. 106)

We should extend this argument to the business case for sustainability. The idea of a business case itself is a stupid one; such a case should never be the sole motivation of engaging in corporate sustainability, although it can be an outcome of such engagement.

I prefer morally informed decisions. But it is getting harder to convince practitioners and academics that there is more to corporate sustainability than the financial bottom line. Having a business case for corporate sustainability should never be a precondition for addressing an issue or a problem. Otherwise, we move towards moral mediocrity…


Andreas Rasche is Professor of Business in Society at Copenhagen Business School and Director of CBS’s World-Class Research Environment “Governing Responsible Business”. He is also Visiting Professor at the Stockholm School of Economics. Andreas can be reached at: ar.msc@cbs.dk and @RascheAndreas. More at: http://www.arasche.com

Sources:
Moon, J. (2014). Corporate Social Responsibility: A Very Short Introduction. Oxford et al.: Oxford University Press.
Palazzo, G., Krings, F., & Hoffrage, U. (2012). Ethical Blindness. Journal of Business Ethics, 109(3), 323–338.

Pic by Caleb Jones, Unsplash.

Multi-Stakeholder Initiatives and Legitimacy

By Mikkel Kruuse.

  • Which groups of actors typically drive the standard development within Multi-Stakeholder Initiatives (MSIs) and why?
  • Power imbalances between actors within MSIs go beyond the global North/South dichotomy.
  • There seems to be a trade-off between input legitimacy (via equal participation) and output legitimacy (outcomes) of MSIs.

Approximate Reading Time: 2-3 minutes.

Private governance in a globalized economy
While it is difficult to dispute the benefits of globalization, the integration of production and trade has made it increasingly difficult for even highly developed nations to regulate activities that extend beyond their borders. For example, how do we decide who is responsible for the negative externalities of global production, such as emission of greenhouse gasses, when considering that goods often pass through several countries before reaching their final destination? Some of these issues can potentially be resolved through cooperation in intergovernmental organizations that are able to establish extraterritorial jurisdiction, but it is important to keep in mind that the implementation relies on the individual governments that in some cases may not be able or willing to do so.

Resulting from the absence of legally enforceable regulation, there has emerged a great number of non-state market-driven governance systems since the 1980s. However, unlike democracies where the government derives its legitimacy through public elections, this is not an inherent part of private governance. As such, a particular concern is that private governance could essentially be equivalent to corporate self-regulation. In order to avoid this issue, non-governmental organizations are increasingly encouraging companies to participate in so-called multi-stakeholder initiatives (MSIs), in which different types of stakeholders work together to achieve a common goal, such as the implementation of social and environmental standards for global production.

Stakeholder Participation and Distribution of Power
Some of the more well-known examples of MSIs include the Forest Stewardship Council (FSC) and the Marine Stewardship Council (MSC), which have both grown considerably since they were established in 1993 and 1996, respectively. Although the membership diversity ideally helps to ensure that MSIs are not being controlled by a single type of actor, this may not always be the case in practice. In particular, it has been suggested in the academic literature that this form of civil regulation is primarily being driven by actors from the global North, while values and knowledge originating in the global South are often marginalized.

Notwithstanding this naturally questions the legitimacy of MSIs, it still seems appropriate to ask why this tendency persists. First, there is a significant cost associated with creating a new initiative and the individual actors must therefore possess sufficient resources to do so. However, as resources are finite there is a trade-off between where to best apply them, and as such it appears reasonable to want something in return. In other words, there must be an opportunity to realize highly valued interests for an actor to spend the resource required to create and maintain an MSI. To be sure, this is not to say that the global South does not share an interest in solving the various social and environmental issues, but when viewed as a single group they have fewer total resources compared to the North. This may offer a partial explanation of why MSIs appears to be dominated by Northern interests, yet it is highly unlikely that there are no actors within the global South group that have the required resources to participate in the various standards-development activities.

Input and Output Legitimacy
Returning to the question of legitimacy, it does not really improve the situation to replace the commonly remarked North/South divide with a big/small distinction. Even so, it may help to better understand why actors behave in a certain way and how MSIs function. As noted above, the purpose of MSIs is to provide for a common good when national governments are unable or unwilling to do so, but at the same time it is not free to create and maintain these initiatives. Thus, while all parties may benefit from the common good, the associated cost renders it implausible that actors would be willing to carry the burden of providing it – that is, unless the reward is considered to be proportional.

In summary, it can be argued that having a small group of actors responsible for the majority of standards development will question the input legitimacy of an MSI, in terms of who participates in the process. But at the same time, the issue at hand is likely to remain unresolved if no one is willing to allocate the necessary resources, which ultimately lowers the output legitimacy of the MSI. In this way, some MSIs may present a trade-off between input and output legitimacy when it comes to regulating global production, where some actors gain increased influence over the decision-making in exchange for spending additional resources.

Finally, it is important to mention that there are a great many different MSIs in existence, and that the contents of this post do not apply to every single one. Instead, the purpose is to help advance the discussion of MSI and legitimacy in general, where these insights will hopefully prove beneficial.


Mikkel is a MSc Candidate in International Business and Politics at Copenhagen Business School and research assistant at the Department of Management, Society and Communication

Pic by Margarida CSilva, Unsplash.

Changing Sustainability Norms through Processes of Negotiation – Strategic Arguments and Collaborative Regulation

By Karin Buhmann.

Two newly published CBS-authored books look at how public-private collaboration can bring sustainability norms into existence and offer recommendations for civil society, business, regulators and academics. Based on research on the discursive evolution of the Business & Human Rights regime and taking an interdisciplinary social science approach, both volumes target broad audiences of sustainability-concerned practitioners and academics across the social sciences.

Read on to learn about the background (urgency for sustainability-concerned stakeholder to have knowledge on processes to develop norms of conduct for transnational economic operations) and insights offered by the books in regard to argumentative strategies for advancing new sustainability norms and their acceptance; and procedural organisation to balance power disparities and avoid capture of the negotiation processes. Titles and details for ordering can be found at the end of this post (with discount offers).

The urgency
What does a Tesla in space have in common with conflict minerals or labour abuse in the garment supply chain? The question may look like a new school children’s riddle. In fact, it is a strong reminder of the urgency to consider how public and private organisations can collaborate to develop norms of responsible conduct, especially in areas marked by governance gaps; how such processes can avoid capture by particular interests; and what communicative strategies actors can deploy to advance the acceptance of new norms across functions and interests.

When Elon Musk earlier in February 2018 successfully launched a space rocket that carried a Tesla headed for Mars (although in missing that target it was less successful), the project was heralded as a break-through in private space exploration. Some have described Musk’s idea of colonizing Mars as a ground-breaking response to the Earth’s depletion of resources and space (!) for an ever-growing human population. Others have lamented the quest for extra-terrestrial resources, and called for humanity to solve problems on this planet before moving on to (as it has been put: wreck) other planets and their eco-systems. Some have been raising warning signs in regard to private exploration of resources in space at the backdrop of an absent or at best immature Earth-ly system for governance of earthlings’ interests and desires in extra-terrestrial resources, whether explored and potentially exploited by private or public actors.

Unfortunately, issues of territory and governance gaps are not limited to outer space. They are very much a fact of life on Earth. They are the cause of many of the social and environmental sustainability concerns that keep media, corporate watchdogs and CSR consultants busy. They are also the causes of tragedies like the 2013 collapse of the Rana Plaza building in Dhaka, Bangladesh, which killed more than 1000 workers employed in garment factories in the building, and injured more than 2000.

Governance Gaps – not only a matter of state weakness
Governance gaps caused by limited territorial jurisdiction of companies’ home states and limited political will to adopt international rules setting a level playing field for companies without freezing the bar at low levels are also at least partial reasons for abuse of workers in numerous other factories, mines, quarries, infrastructure or agri-industry projects or in the informal industry that form part of global value chains, typically supplying goods made in low-wage countries to buyers or retailers in higher-wage countries. These problems have been argued to be due to states (in capacity of governance phenomena) being absent, weak or ineffective. Academics have been debating so-called political CSR, arguing for private enterprises to fill gaps left by ineffective nation states. However, the reason for governance gaps is not only state weakness. Jurisdictional limitations on states’ powers to regulate and enforce rules outside their territory is also part of the reason, shared by nations across the world and exacerbated by disagreement and lack of political will at the international governance level to adopt international rules pertaining to business.

The issue of nation state jurisdiction and territory can be compared to tedious situations in everyday life that are annoying but hard to change: If your neighbour plays music that you do not like in his or her home, you are not allowed, to access that home and turn down the volume.  Unless, of course, the neighbour invites you to do so, or a prior agreement has been put in place. Similarly, you probably would not be pleased if your neighbour trespassed your property to turn off your music. Instead, the solution is to communicate and to do so in a manner that will – hopefully – drive change with your neighbour. Governance of transnational business activity largely depends on similar action, at least until governments agree to adopt and accept strong national rules with extraterritorial application, and/or international rules that apply to business. And as long as Earth’s governments do not agree on such rules for earthlings’ activities beyond our planet, this goes for exploration and exploitation of outer space too.

Beyond CSR guidelines, reporting and codes of conduct
Global sustainability concerns go beyond climate change, often related to economic practices with social and environmental impacts. Excessive natural resource exploitation, land grabbing and sub-standard labour conditions in global supply chains are frequent occurrences that also have high sustainability relevance.  Such practices pose risks to the environment and human lives currently as well as in a longer term sustainability perspective of balancing current needs with those of the future. Investments and trade have caused depletion of large stretches of tropical forests, which not only harms the environment and adds to climate change, but also affects the socio-economic conditions of communities. The transnational character of these economic activities often involve or affect numerous private and public actors in several states or regions. This causes challenges for singular or even sector-wide private self-regulatory initiatives, and reduces the effectiveness of self-regulation by individual actors on their own. The enormity and encompassing character of global sustainability challenges have also drawn attention to the limitations of singular initiatives like private or sectoral Corporate Social Responsibility (CSR) guidelines, reporting schemes and codes of conduct. Hence, broadly applicable multi-stakeholder-created sustainability governance schemes have emerged to fill gaps left by public as well as private governance.

Breakthroughs in global sustainability governance
The UN Global Compact with its ten principles in the four issue areas of human rights, working standards, environment and anti-corruption, is a prominent example. Yet like the Paris Climate Change Accord offers a general normative framework but leaves much to further detailing of implementation. The UN ‘Protect, Respect and Remedy’ Framework  and Guiding Principles on Business and Human Rights (UNGPs) offer more detailed guidance that has inspired several other transnational business governance instruments even beyond human rights, thus influencing the evolution of CSR norms and governance in a broader sense (Buhmann 2016, 2015). All these instruments were firsts within their fields, and broke previous stalemates. What causes such breakthrough? How can organisations concerned with sustainability engage with a regulatory process to advance substantive outputs? Understanding this can have far-reaching impacts for future public, private and hybrid governance of sustainability, locally, globally and beyond, and whether private, public or hybrid.

Norms of conduct: the road to the product is as important as the product
When we think of normative directives for private or public organisations for actions that conform with global sustainability needs, the focus is often on the substantive content of the rule as such: in other words, what are organisations encouraged or required to do? However, the road that leads to that substantive content of a rule is a condition for what ends up in the rule, whether soft (guiding) or hard (binding). It is therefore crucial to understand what makes some processes progress and deliver results, whereas others stall.

Across the globe, organisations of many types encounter difficulty in adequately meeting environmental and social sustainability challenges. The diversity of processes and outcomes calls for insights on what drives and impedes processes of clarifying what constitutes acceptable conduct. There is a particular need for knowledge on what makes for effective processes for defining norms for such conduct, and for the norms to become accepted with a view to integrate into organisational practice.

The field of business responsibilities for their societal impacts is marked by a diversity of interests that are often not aligned, even within a sector: those of different business organisations and sectors, different civil society organisations with diverse focus issues, and various national or local governments with diverging interests. As result, developing norms of conduct becomes a process of negotiation in which participants often have regard to what is in their own interests. The bumpy road to the 2015 Paris Climate Change Accord is a case in point, but not unique. The evolution of international normative guidance for businesses in regard to human rights leading to agreement on the 2008 UN  Framework and 2011 Guiding Principles on Business and Human Rights have received less attention and acclaim outside human rights circles, but the processes to those results represent important innovation too and potential lessons for future collaborative regulation.

Studies suggest that while some initiatives to develop norms of conduct for responsible business conduct get weakened in the process, typically as a result of lobbying by certain organisations (Kinderman 2013; Fairbrass 2011; Buhmann 2011), in other cases the key to a strong or weak result is in the capacity of actors at making the effective argument, and linking up with the right partners for that purpose (Hajer 1995; Kolk 2001[1], Arts 2001[2]).

How are norms on sustainability issues negotiated?
At this backdrop, it is highly necessary to understand how norms on sustainability issues are negotiated and how stalemates that mark many such efforts can be broken. Two new books by CBS professor Karin Buhmann deal with this issue, both drawing on the evolution of the emergent regime on business responsibilities for human rights. Of the two monographs, Changing sustainability norms through communicative processes: the emergence of the Business & Human Rights regime as transnational law (Edward Elgar 2017) undertakes an analysis of the discourse that marked the construction of detailed normative guidance for businesses and states in regard to business responsibilities on human rights. It analyses communicative and argumentative dynamics that allowed the multi-stakeholder process launched by the UN to break previous stalemates in several settings, as well as dynamics that caused previous initiatives to fail. It finds that the ability to address other actors in terms that directly speak to their rationality and interests holds big potential for obtaining significant influence on the details of the normative outcome, and its acceptance. The book offers a theoretical explanation of this, and expands the analysis through findings and explanations on how actors in multi-stakeholder regulatory processes may strategically play on the interest of other actors in change and in preserving their interests. It offers insights on argumentative strategies that can be applied by civil society, CSR- and sustainability-committed companies, regulators or others to advance the acceptance of new norms on sustainability with other actor

Collaborative regulation for balancing of power disparities
In recognition that where negotiations take place on issues marked by highly divergent interests and issues of power, legitimacy of the process and output are significant for a normative outcome to be meaningful, the other monograph, Power, Procedure, Participation and Legitimacy in Global Sustainability Regulation: a theory of Collaborative Regulation (Routledge 2017) offers a theory-based proposal for collaborative regulation that takes account of power disparities and continuously manages these. The analysis combines empirical experience on public-private regulation of global sustainability concerns and theoretical perspectives on transnational regulation to offer a new theoretical approach to guide multi-stakeholder negotiations. It sets out detailed suggestions for the organization of multi-stakeholder processes to regulate sustainability issues to avoid capture and ensure the legitimacy of the regulatory process as well as the outcome of that process. In a global legal and political order, in which the private sector is increasingly replacing the public in terms of power and privilege but lacks the democratic legitimacy of the state and international organisations, such issues are of global as well as regional or local pertinence.

By addressing the same overall topic of developing sustainability norm and empirical cases to inform the analysis, the books develop synergy through two separate analyses that are mutually complementary. Both volumes apply theoretical perspectives from organisational and communication studies, political science and sociology to enrich the socio-legal analysis of regulatory strategies and innovative transnational law-making. This makes the volumes speak to the broad audiences that are engaged in the development of sustainability norms in practice and theory.

Focusing on the processes for developing norms of conduct, the analyses leave assessments of the uptake and effectiveness of such norms in organisations to future studies.

Titles and publisher details

Karin Buhmann (2017) Changing sustainability norms through communicative processes: the emergence of the Business & Human Rights regime as transnational law Edward Elgar Publishers (Globalization, Corporations and the Law). 416 pages.  Order here; 35 % discount code valid through March 2018: VIP35.

 

Karin Buhmann (2017) Power, Procedure, Participation and Legitimacy in Global Sustainability Regulation: a theory of Collaborative Regulation. Routledge/Taylor & Francis Publishers (Globalization: Law and Policy). 200 pages.  Hardcover and e-book available here.

 

 


Karin Buhmann is Professor with special responsibilities for Business and Human Rights. She is employed at the Department of Management, Society and Communication (MSC) at Copenhagen Business School (CBS). She currently serves as the interim Academic Director of the cbsCSR (CBS Center for Corporate Social Responsibility) and CBS Sustainability.

[1] Kolk, A. (2001) Multinational enterprises and international climate policy. In Arts, Bas, Math Noortmann and Bob Reinalda (eds) Non-state actors in international relations, Hants: Ashgate: 211-225.

[2] Arts, B. (2001) The impact of environmental NGOs in international conventions. In B. Arts, M. Noortmann and B. Reinalda (eds). Non-state actors in international relations, Hants: Ashgate: 195-210.

Pic by David Watkis, Unsplash.

 

 

 

 

Investigating Emerging Responsible Corporate Tax Practice

By Sara Jespersen.

  • In the absence of an over-arching world tax authority, much agency and power remains in the hands of the corporations operating the system.
  • Much of the discussion on responsible corporate tax practice is focused on those corporations that maximize the use of the rules to minimize their tax payments
  • But what about those corporations that do not participate in the race to the bottom on tax practices –  can we see emerging trends of responsible corporate tax practice and where?

Approximate reading time: 2-3 minutes.

The issue – corporate tax and globalization
Corporate tax planning is high on the political agenda in Denmark and, indeed, internationally since the revelations of how corporations minimize their tax bills through the use of tax havens have started rolling. Several corporations have been exposed for their aggressive practices by the European Commission, NGOs, journalists – to the great outrage of the public and politicians.

Valuable work is being undertaken to understand the depth of the crisis for society, the seriousness of the problem – its persistence and scale, and the dynamics of the politics of solving it. Much of which is focused on those corporations that maximize the use of the rules to minimize their tax payments.

But what about those corporations that already pay their so-called fair share and do not participate in the race to the bottom on tax practices? In particular, those who are not afraid to show it?

The governance challenge – tax competition among sovereign states and the offshore world
The challenge of all this arises because of the way in which the governance of the tax affairs of multinational enterprises (MNEs) is set up. MNEs that operate in several countries from the North to the South of the world operate in various judicial systems. Many of them also have mobile assets that can be moved from one jurisdiction to another through the click of a mouse and has little to do with the physical world. Some jurisdictions have set themselves up to attract the location of this type of intangible assets and will give favourable tax conditions in return. Judging where corporate assets should be taxed and what the market value is of intangible assets is no easy task for any one country in the world. With no over-arching world tax authority the outlook for permanent solutions to some of these fundamental challenges to the taxation of MNEs corporate profits is looking somewhat long-term.

What role for business and for responsible corporate tax practices?
So it looks that much agency and power remains in the hands of the corporations operating the system. In a society where the focus on corporate tax payments remains one of the hottest topics and trust in corporate tax affairs is dwindling for years on end conditions are perfect for encouraging greater responsibility in corporate tax matters. But what responses are we seeing from the business world of their own initiative if any? How are they responding to this mounting distrust in corporate taxation practices from “society”?

There are signals that somethings are brewing. The fair tax mark in the UK have taken off, CSR Europe have included the issue of corporate tax in their work, as has the network of responsible investors the Principles for Responsible Investment (PRI) and the European Commission is not shy to be clear about their vision of tax as a part of CSR (speech by Margrethe Vestager, EU trade commissioner.

My research going forward will focus on investigating this emerging trend of responsible corporate tax practice. It will investigate to what degree it is already taking place and what it might consists of, as well as its meaning and potential in an international political economy with a great focus on corporate tax payments and MNE’s role in supporting the achievement of the sustainable development goals around the world.


Sara is PhD Fellow at Copenhagen Business School and her research is focused on the emerging relationship between responsible business conduct and corporate tax planning of multinational enterprises. Building on several years of experience from working with international development NGOs, Sara is particularly interested in how this affects developing countries’ financing challenges and the focus on the role of the private sector in achieving the sustainable development goals (SDGs).  

You can contact Sara via email and follow her on Twitter.

Pic by Madison Kaminski (Unsplash), edited by BOS.

CBS Hosts 6th Biennial International Symposium on Cross-Sector Social Interactions in June 2018


How can business, government, and civil society interact to better address societal challenges such as climate change, immigration, social exclusion, and poverty?

The 6th biennial International Symposium on Cross-Sector Social Interactions (CSSI 2018), hosted by Copenhagen Business School (CBS) on June 10-12 2018, will bring together researchers and practitioners to understand and address this question. The event is a meeting point for the fast-growing research community on cross-sector interaction and collaboration.

Under the theme of “Collaborative Societal Governance: Orchestrating Cross-Sector Social Partnerships for Social Welfare”, academics and practitioners will present and discuss new and innovative ideas for organizing and managing cross-sector collaboration. How can current and future approaches, systems and tools foster cross-sector collaboration and create societal impacts?

The event will include keynote speeches, panel debates and workshops related to cross-sector collaboration and partnerships. Topics to be addressed include, but are not limited to the following:

  • Cross sector collaboration and the Sustainable Development Goals (SDGs)
  • Communicating collaboration and partnerships
  • The role of partnership brokering
  • Financing cross-sector collaboration and partnerships
  • Formal and informal governance of cross-sector collaboration
  • Tracking the impacts of cross-sector collaboration
  • Cross-sector collaboration for the circular economy
  • The changing role of the state in the partnership society

Call for Extended Abstracts and Full Papers
The organisers of CSSI 2018 Symposium invite scholars and practitioners to submit papers linked to the overall theme ”Collaborative Societal Governance”. The aim of the Call is to open up collaborative societal governance as a new multi-disciplinary area of research by inviting contributions on the nexus of public administration, social policy, management and sociology. See the full Call text here.

CSSI 2018 Special Issues
Papers presented at CSSI 2018 can be submitted to either a symposium issue of Nonprofit and Voluntary Sector Quarterly (NVSQ) on “Collaborative Societal Governance” or to a special issue of Business and Society entitled “Collaborative Cross-Sector Business Models for Sustainability”. More information about special issues and other publications will be uploaded on the CSSI 2018 website.

Doctoral Consortium
The CSSI 2018 event will begin with a Doctoral Consortium, where PhD students will present and discuss their research with senior researchers from the CSSI community. Participants will also get new insights on theories, methodologies and tools for research on CSSI-related topics. The Doctoral Consortium will be held Sunday, June 10, 2018. You can read more about the Doctoral Consortium on the CSSI 2018 on the CSSI 2018 website or click here.

For more information visit the CSSI 2018 website.


Copenhagen Business School Centre for Corporate Social Responsibility (cbsCSR) is responsible for the organization of CSSI 2018. Questions and comments regarding the conference should be sent to: CSSI2018.info@cbs.dk. The CSSI 2018 event is organized with support from The Danish Chamber of Commerce, the GRB Research Environment and The Carlsberg Foundation.

 

 

About Meta-MSIs and Private Governance

By Luisa Murphy.

  • What are Meta-Multi-Stakeholder Initiatives (MSIs)?
  • What is their role and contribution to private governance?
  • How do Meta-MSIs enable the translation of responsible business policies and practices in unique octopus like ways?

Approximate reading time: 4-5 minutes.

Meta-MSIs, octopus arms and brains
What do Meta-multi-stakeholder initiatives (MSI) and octopuses have in common? Through my own PhD research of what I call a ‘Meta-MSI’ (the ASEAN CSR network), a phenomenon similar to the MSI (definition below), I have been investigating the dynamics and interactions between national networks which I liken to an octopus’ eight arms and corresponding eight mini- brains and the headquarters or “global network”. In this blog, I will define the Meta-MSI and briefly discuss how its constitution of networks provides important new insights into national level practices which may enable it to translate responsible business in intelligent, efficient and indeed, octopus like ways.

Towards a definition of the ‘Meta-MSI’
A Meta-MSI is a new type of MSI whose members comprise distinct organizational forms such as foundations, listed companies’ associations, chambers of commerce and industry and MSIs not individual members which usually constitute MSIs. In this regard, it also appears to have some key similarities to the ‘Meta-organization’ (e.g. Ahrne & Brunsson, 2005 & 2008) although I am still exploring the link (blog for another day).

Similar to MSIs, Meta-MSIs promote responsible business policies and practices through collective action, capacity building and shared vision. It includes MNCs, intergovernmental organizations and sometimes government agencies as partners. The members but also the partners are key to its legitimacy and vice versa. Hence, like an octopus, a Meta-MSI has a central brain (headquarters) but also eight mini-brains (national networks) which carry out autonomous activities. Moreover, like an octopus which coordinates with other sea creatures when necessary to achieve its ends, Meta-MSIs collaborate with partners on specific issues at the headquarter and national network level.

One example of a Meta-MSI is the ASEAN CSR network which is comprised of eight networks, including seven national networks and one regional network in Southeast Asia. It includes listed companies associations: CSR Club of Thai Listed Companies Association, MSIs: Global Compact Network Singapore, foundations: Indonesia Business Links; League of Corporate Foundations; ASEAN Foundation and national and international chamber of commerce and industries: Vietnam Chamber of Commerce and Industry; Union of Myanmar Federation of Chambers and Commerce and Industry and International Chamber of Commerce – Malaysia. Moreover, it engages corporate partners such as Hitachi and intergovernmental partners such as United Nations Office on Drugs and Crime (UNODC). These four types of member organizations are similar to the three hearts of the octopus which ensure circulation through its organs.

Meta-MSI contributions to private governance
Due to their structure, Meta-MSIs appear to be uniquely tailored to national level contexts and dynamics which provides for efficient functioning of the whole. Below, I briefly highlight three areas which I think enable the translation of responsible business policies and practices in unique and flexible octopus like ways.

First, as mentioned Meta-MSIs incorporation of heterogeneous member organizations provides insights into diverse ‘national business systems’ (Whitley, 1999) and how responsible business is approached in different contexts. In turn, Meta-MSIs operate by allowing policies and practices to be contextualized to these settings. Hence, like an octopus, the Meta-MSI is able to camouflage or adapt its policies and practices to its environment. This may lead the organization to be more efficient in the long-run, given that organizations do not need to defend the implementation of policies and practices which are different from other member organizations. Instead, all organizations are working towards the same goal of responsible business but may achieve them via different means.

Second, important studies (e.g. Rasche, 2012) have shown that the co-existence of loose and tight couplings within global networks provide MSIs with the ability to manage issues related to stability, flexibility and legitimacy, Meta-MSIs appear to navigate these challenges solely through an underlying loose organizational structure. This facilitates the translation of responsible business because it enables national networks to work even more autonomously (similar to an octopus with its eight arms) yet contribute to the whole through best practice sharing etc. The Meta-MSI is hence like the brain of the octopus, it coordinates with its eight mini-brains (it does not command), which allows (national) ownership of the relevant policies and practices. This may be important for promoting effective outcomes in the long-run as national organizations will develop institutions for responsible business which do not require micro-management by the “global” organization.

Finally, Meta-MSIs appear to be more exclusive than MSIs given their small number of member organizations at the “global” level and their corresponding memberships which range from being more exclusive to inclusive at the national levels. How this exclusivity impacts efficiency is another question. For instance, it might be worth considering whether it is more efficient to engage with one set of organizations e.g. SMEs through a national network (e.g. chamber of commerce) rather than SMEs and MNCs in the same network. Meta-MSIs are hence similar to an octopus which has a fixed number of arms and is wily about the other creatures it forms collaborations with.

In conclusion, while Meta-MSIs appear to be similar to octopuses in that they do not like the spotlight, I think it is worthwhile to cast a light on them and their national networks by considering how these global-national network (eight mini-brain- octopus) dynamics influence the governance for responsible business. I look forward to continuing the dialogue with you on octopuses, Meta-MSIs and other creatures in the private governance sea.


Luisa Murphy is a PhD Fellow at Copenhagen Business School and supported by the VELUX Endowed Chair in Corporate Sustainability. Her research examines governance for anti-corruption. She brings a human rights and business background from the University of Oxford and legal experience from the Antitrust Division of the United States Department of Justice.

Pic by Taylor Ann Wright, Unsplash.

A Story of Poison, Pork and Consumer Protection

By Jan Bauer.

  • Renewal of controversial weed killer supported by Germany despite internal dissent
  • Corporate support seems the only consistency in many decisions
  • What evidence should determine the public opinion of a minister?

Glyphosate and a German Minister under Fire
The German Minister of Food and Agriculture, Christian Schmidt (CSU), came under fire in the end of November. He voted in favor of renewing the license for the controversial weed killer Glyphosate in Europe – against the will of the Minister of the Environment, Barbara Hendricks (SPD), and without consulting chancellor Merkel. Mr. Schmidt said he “made the decision on [his] own and within the responsibility [his] department”. While the potential health and environmental risks of Glyphosate, better known under Monsanto’s commercial name Roundup, are still subject to debate, the unilateral approach by the minister has at least poisoned the political climate between the two parties before the upcoming exploratory negotiations to renew their “grand coalition”.

Many Question Marks behind a Political Free Solo
One can only speculate why Mr. Schmidt considered it necessary to purposefully violate the joint rules of procedure between the federal ministries that would have required him to abstain from voting as long as there is a disagreement between the federal ministries. Mr. Schmidt defended his actions by claiming that his vote will lead to a more restrictive use of the herbicide in some areas. Glyphosate producer Monsanto, currently in the process of being taken over by the German chemical company Bayer, seems not satisfied with the renewal either and would have expected an extension of the license by more than five years.

Eat more Meat, but don’t sell a “Vegan” Schnitzel
This decision is by no means the first controversy surrounding the German Minister of Food and Agriculture and his duty to balance cooperate and consumer interests. Mr. Schmidt openly promoted the consumption of pork in public institutions, which has been abandoned by some canteens to avoid complications with religious customers. Additionally, he encouraged to ban the use of common marketing practices to sell meat replacements as “vegetarian sausages” or a “vegan schnitzel”. This effort was advocated to prevent the confusion of consumers, as they might be overburdened by linking the words “vegan” or “vegetarian” with the meatlessness of the product in questions – what should happen to German meat dishes that falsely claim to be vegetarian, such as “Leberkäse” (literally translated to “liver cheese”) remains unclear. Despite the minister’s concern, there is little evidence for an actual confusion among consumers and the fact that the growing popularity of vegetarian and vegan products negatively affects the meat industry created some skepticism about the motives for such a proposal.

The ambivalent Role of Scientific Evidence in the Process of Policy Making
This issue relates to larger questions about the importance of scientific evidence to guide regulatory action. Despite increasing efforts to foster evidence-based policy, the scientific evidence rarely provides perfect guidance on what will be the outcome of a certain policy (the discussion about the impact of the planned U.S. tax reform is another famous example). So in the absence of clear evidence; what determines a minister to go one way or the other: personal beliefs, the opinion of his constituency, the influence of lobbyists?

The Traffic Light System for Food Labels – as Case in Point
For the specific case, we might shed some light on this by looking at remarks from Mr. Schmidt on issues with clearer evidence. In the area of nutritional food labels, research shows that the mere provision of nutritional facts on the back of products does insufficiently guide consumer choices and recent studies highlight that salient and simplified front-of-package labels, such as the traffic light system, can help consumer making healthier choices. Additionally, there is a broad public support for better food labelling that guide consumers and make healthy choices easier. Despite this evidence, the minister considers such labels as an “impermissible simplification” and rejects further regulation in this direction as too paternalistic.

A view shared by several other EU countries that tried to go against the voluntary traffic light food label in the UK, as it “aimed at classifying food as more or less “healthy””, which would violate trade legislation. Traditional product manufactures have little leeway to reformulate their products and claim to be disadvantaged. For instance, the majority of meat products would receive a red label which might negatively affect sales – in other words, the fear is that such labelling actually works from a consumer’s point of view. Hence, there seems to be an inherent tension between consumers’ needs for guidance and industry claims of discrimination. The European Commission apparently announced “a thorough review” by the end of 2017.

People before Profits
It is hard to understand on what basis Mr. Schmidt himself determines the needs for regulatory action and why he made each of these individual decisions. While the Glyphosate incident appears to be a procedural failure in the absence of clear evidence, his stances on food labelling fails to acknowledge a general consumer science and public consensus. All decisions, however, seem to be in line with the interests of the industry. Mr. Schmidt himself stated that “we should not restrict the choice for the majority of society for reasons of ease or cost” when it comes to leaving pork off the menu. Hence, I propose to consistently follow this logic and not restrict consumer protection supported by the majority of scientists and the public for reasons of ease or costs for some special interest groups.


Jan Bauer is Assistant Professor at Copenhagen Business School and part of CBS’ Governing Responsible Business Research Environment. His research interests are in the fields of health economics and consumer behaviour. As part of the Nudge-it Project, he focused on fostering healthy food choices of children and adults.

Pic by GLOBAL 2000 / Christoph Liebentritt, flickr.

Where is the Space for Ethics in Rule Governed Organizations?

By Anna Kirkebæk Gosovic.

Imagine that you work in an organization where your choices, your knowledge and your thoroughness in your work could potentially impact the lives and health of people; for the better, yes, but also for the worse, if you make a mistake. Imagine then, that at any moment, someone could come and go through all your work, ask for all the details of your choices and demand proof that you made the right decision according to all the rules that you need to know. And then imagine that large investments are at stake and that the failure or success of these investments depend, partly, on the thoroughness of your work.

Strict rules and procedures
This is the reality that many employees in pharmaceutical companies operate in. Many organizations today are governed by policies and procedures to make things run smoothly but some organizations are – to a larger extent – characterized by strict monitoring and reporting procedures, high preoccupation with failure and commitment to organizational resilience. Weick and Sutcliffe name such organizations “High Reliability Organizations” (HRO) (Weick & Sutcliffe, 2007). HROs are organizations working in fields where mistakes can have severe consequences and which, as a result of this, have strict procedures for ensuring compliance with processes and policies.

Studying HROs, scholars have focused on organizations such as air craft carriers (Weick & Roberts, 1993), nuclear power plants (Schulman, 1993), hospitals (Chassin & Loeb, 2013) and military units (Bierly & Spender, 1995; Demchak, 1996); all of which operate in environments rich with potential for error but where the consequences of such are too severe to allow them to happen (Cf. Weick, Sutcliffe, & Obstfeld, 1999, p. 32).

With their close attention to monitoring, following procedures and regimes for registering data, actions and decisions, pharmaceutical companies can be defined as HROs.

Is following the rules enough?
Organizations preoccupied with reliability may spend more time and effort organizing for controlled information processing, mindful attention and action than other organizations. Weick and Roberts call this “mindful organizing” (Weick & Roberts, 1993, p. 357). But with such elaborate legislative frameworks in place as in the pharmaceutical industry, how do employees experience their room for maneuvering and for acting ethically? And how do staff and managers perceive the ethical dilemmas they meet? Is it enough to have followed the rules? And what happens in situations when there is a wider space for interpretation of such rules? How does moral reasoning take place at the intersection between legislative frameworks, financial considerations, scientific possibilities and human lives? And what domain outweighs the others at which points in time?

These are the questions that I hope to answer by studying within – and in partnership with – a pharmaceutical company. The project only started in January, so if you are interested in the answers to this, be patient, and stay tuned!


Anna Kirkebæk Gosovic is a PhD student at the Department for Management, Society and Communication at Copenhagen Business School. She is working on business ethics within a multinational pharmaceutical corporation.

Pic by G. Crescoli, Unsplash.

 

The Sustainable Development Goals: Elite Pluralism, not Democratic Governance

By Daniel Esser.

  • Was the process leading up to the SDGs really an exercise in global democratic policy making?
  • Although broad consultation efforts shaped the process, these alone were not able to alter the power structures undergirding the political economy of aid.
  • In the end, UN members states finalized the agenda behind closed doors and civil society organisations were once again relegated to serving as commentators and claqueurs.

Approximate reading time: 3-4 minutes.

The MDGs: An exercise in top-down development planning
Almost twenty years ago, a small group of white men sat together and dreamed up the Millennium Development Goals (MDGs). Soon after, the United Nations (UN) deployed them as carrot and stick to halve extreme poverty and hunger, reduce infant mortality, and put all girls and boys into primary education, all by 2015. There was real confidence that the MDGs’ top-down programming would eventually reach the farthest and most destitute corners of the globe, and that national as well as global resources would finally be spent on well-coordinated and effective projects. Listening to UN technocrats pontificate about the MDGs’ indispensability, one could have almost believed that old-fashioned development planning had finally been put on the right tracks. By the end of the exercise, thousands of new jobs in the international development industry had been created, yet most of the goals had been missed. The MDGs had begotten a hyperactive global network of goodwill ambassadors, faithful implementers and intrepid evaluators staff while billions in the global South continued to suffer.

The SDGs: Consultations as the end of procedural elitism?
The Sustainable Development Goals (SDGs) were supposed to end the MDGs’ dual legacy of procedural elitism and edentulism. Framed by the UN as the world’s foremost post-2015 development agenda, the new goals were designed to be more comprehensive in both scope and impact. Crucially, the UN also launched considerable efforts to incorporate voices from outside of the UN system. Thematic consultations took place around eleven areas selected by the UN Development Group (UNDG). They were complemented by web consultations, national consultations in 88 countries, and global high-level meetings. In addition, the UN created two websites to allow for direct consultation by inviting users to submit proposals and vote for challenges they considered most pressing. Moreover, a UN-sponsored civil society organization (CSO), ‘Beyond 2015’, brought together another 1,000 CSOs participating in national consultations.

Global democratic policy making – high aspirations, sobering facts
Undeniably, these efforts marked a clear departure from the MDGs’ backroom fecundation. But have they been sufficient to justify senior UN staffers’ praise of the SDGs as an exercise in global democratic policy making? Broad consultation alone does not alter the power structures undergirding the political economy of aid. Instead, it creates a thin layer of legitimacy that fades away as soon as accountability in invoked. The process leading up to the SDGs was rooted in an assumption that a goal-based framework was the only viable option; alternatives to such goals were never considered publicly. Countries were selected by UNDG and UN Resident Coordinators, and the breadth and depth of national consultations varied starkly. And although UNDG’s final report listed crowd-sourced issue rankings, it did not provide any rationale for excluding issues from subsequent high-level negotiations.

Closed doors, revisited
In the end, UN members states finalized the agenda behind closed doors. CSOs were once again relegated to serving as commentators and claqueurs. When push came to shove, the UN leadership thus followed its half-century-old practice of elitist international governance. Even though the UN leadership has been relentless in praising the virtues of accountability for post-2015 development cooperation, it has so far shied away from institutionalizing accountability in a way that would really make a difference: between the UN system and its powerful national agenda setters on one side, and CSOs, taxpayers, and intended beneficiaries on the other. If the SDGs demonstrate anything, it is that the UN remain unlikely to usher genuine global democratic governance into being.


Daniel E. Esser is Associate Professor of International Development at American University’s School of International Service in Washington, DC. His research on local governance amid violence, organizational management, and global health politics is widely cited. A former staff member of the United Nations in New York and Bangkok, he follows the organization’s continuous struggle to make a difference in the world from a safe academic distance. He can be reached at esser@american.edu.

Pic by UN Ukraine, edited by BOS.

Corporate Criminal Liability in Germany – An Idea Whose Time Has Come

By Andreas Rasche.

Siemens, Volkswagen, Deutsche Bank … and now Airbus. What is wrong with German companies? It seems that German firms are disproportionally exposed to corporate irresponsibility. Of course, this is more of a subjective assessment than a statistical fact, and to be fair Airbus SE is a European company. Corporate irresponsibility appears in all jurisdictions, for all sorts of companies, and for a number of different reasons. My argument here is that Germany still has a legal infrastructure that makes prosecution of corporate criminal acts more difficult than in other countries.

It may come as a surprise, but Germany has, so far, not enacted an explicit corporate criminal law. While other countries have passed strict legislation to fight corporate criminality (e.g., the FCPA in the US or also the UK Bribery Act 2010), German legislation stands out in a number of ways. Unlike in other countries, you need to overcome a number of hurdles to sue corporations directly for criminal conduct. Existing legal provisions regarding corporate criminal liability are mostly found in §30 of the German Ordungswidrigkeitengesetz (OWiG). This law stipulates that corporations can be held legally accountable if someone representing the company has committed a criminal offense.

The Current Legal Situation in Germany
This legal framework puts Germany in a special role, as many other (developed) nations do not require prosecutors to prove individual guilt. As we know from CSR-related studies, corporate misconduct is usually diffused in organizations and it is often difficult to single out individuals as drivers of misconduct. Even if individuals can be singled out, it is still necessary to prove – beyond doubt – that this person was responsible for the criminal conduct on behalf of the corporation. The discussions around who was responsible for Volkswagen’s Dieselgate are a case in point. This leads to an interesting situation: While a rather high number of corporate crimes come to the attention of German public prosecutors (around 63.000 cases in 2014), few of these cases go to court, and in even fewer cases legal fines are imposed. The reason for this situation is mostly related to the fact that public prosecutors need to prove individual guilt rather than corporate guilt.

Of course, German companies are aware of the legal situation and this provides negative incentives. The current legal infrastructure may not directly motivate misconduct, but it is likely that it favors ‘lax behavior’ and unreflective actions.

Enact a Corporate Criminal Code
My plea here is simple: Germany has to enact and enforce an explicit corporate criminal code as soon as possible. The current legal instrument – the OWiG – is neither timely nor sufficient to fight corporate crimes like corruption. Actually, looking into the legal provisions reminds me a little of Milton Friedman’s famous saying that only individual actors – i.e. people with flesh and blood or ‘natural persons’ in legal lingo – can have responsibilities, and that corporate actors cannot have responsibilities because they are just a collection of individuals. We know that such an argumentation only works in the ideal world of economists (and even there its explanatory power is very limited). Any organization theorist would agree that corporations are collective actors; they possess shared norms, values and belief systems and hence there is agency beyond the individual. This is why we cannot and should not make the identification of individual guilt a precondition for corporate criminal liability.

In 2013, Thomas Kutschaty, then Minister of Justice of North Rhine Westphalia, presented a first draft for a German corporate criminal code (the so-called Verbandsstrafgesetzbuch). Ever since not much, if anything, has happened. The defense line of hardnosed corporate lobbyists is clear: under German law criminal liability is related to a fault on the side of the offender (the so-called Schuldprinzip) and hence fault cannot exist for a corporate entity itself, at least not as long as individual misconduct under the name of the company is proven. It is time to rethink the basic condition underlying such an argumentation: the legal principle and ancient rule societas delinquere non potest – responsibility belongs to individuals – may really be antique and outdated.

It is not necessary to simply transfer the legal liability of a natural person to a corporation, which probably would be very controversial. Fault can also be based on, for instance, a legal person’s internal organization or aggressive corporate cultures (as several cases of misconduct have shown). The bottom line? – Crimes are not always committed by men…


Andreas Rasche is Professor of Business and Society at Copenhagen Business School and Visiting Professor at the Stockholm Schools of Economics. More at www.arasche.com and @RascheAndreas.

Pic by zolnierek, Fotolia.

License to Critique: Inoculating Standards against Closure

By Lars Thøger Christensen.

  • Sustainability and responsibility standards entail a danger of organizational actors stopping to reflect about what these values could or should entail in each particular situation and setting.
  • Rather than passive compliance, standards should produce participation, involvement and contestation.
  • Several communication principles need to be respected for a license to critique approach to have its desired effects.

Approximate reading time: 3-4 minutes.

Fixed, clear and authoritative standards able to discipline and regulate organizational behavior are often called for on the sustainability and responsibility arenas. This makes perfect sense. Standards that are loose, vague or open-ended allow organizations to subscribe to the values of sustainability and responsibility without changing their behaviors significantly. In such cases, standards may be criticized for being simply “lofty pronouncements” disconnected from other organizational practices. Yet, if standards become too strict and rigid they may end up working against their original purposes.

Standards are voluntary and predefined norms and procedures that specify desirable organizational behavior in particular social or environmental contexts.

Most standards in sustainability and responsibility are developed, designed and assessed by international organizations, governments, or multi-stakeholder initiatives outside the adopting organization, often with the intent of prescribing and shaping the dos and don’ts in a particular context. Their ability to generate compliance is usually considered an important success criterion. Passive compliance, however, may not serve the social and environmental interests at play. Strict standards tend to produce mechanical and unreflective “ticking the box” exercises where the main concern is to appear good and be let “off the hook” by critical stakeholders.

Compliance is not necessarily the best measure for responsibility and sustainability.

When responsibility and sustainability are prespecified in detail, there is a great danger that organizational actors stop reflecting about what these values could or should entail in each particular situation and setting. Such “closure” is detrimental to both the environment and to society. Under conditions of closure, curiosity and argument about values are replaced by attempts to manage the standards, to transform their ideals into technical measures, and to document their impacts on organizational practices. By naturalizing the standard as the “normal thing to do”, closure transfers responsibility from the organization to the standard itself in a way that allows the organization to demonstrate responsiveness without responsibility: “It is not our fault. We are complying with the standard”.

 Strict and closed standards produce organizational responsiveness without responsibility.

Rather than passive compliance, standards should produce participation, involvement and contestation. Involvement, critique and contestation are vital dimensions in processes of testing, fine-tuning and improving standards to fit changing social and environmental problems. To facilitate such processes, organizations would be better off embracing – rather than repudiating – critical voices. Such attitude may be described as a “license to critique”. License to critique is a managerial philosophy designed to involve managers and employees, draw on their insights and stimulate their critical thinking while avoiding a premature closing down of discussions along with a potential to improve organizational practices. Critique in the shape of criticisms, appraisals, examinations, opinions, argumentations, or the suggestion of alternatives is recognized as an important and necessary dimension of organizational development and learning.

A license to critique approach welcomes and encourages constructive input from all corners of the organization.

Several communication principles need to be respected for a license to critique approach to have its desired effects. The most important are these:

  • Confronting alternatives. The licence to critique approach invites alternatives by regarding the standard as a “lens” through which managers as well as employees are expected to observe and challenge existing ideals, assumptions and practices.
  • Authorizing participation. The license to critique approach invites participation with a focus on openness, mutuality, and trust, as well as a tolerance for difference and variety. This invitation calls on organizational members to act constructively in shaping organisational ideas and practices. Simultaneously, they call on managers to allow for intensive boundary spanning and to draw actively and systematically on the day-to-day experiences, ideas and enactments of standard users.
  • Talking to learn. Since sustainability and responsibility are complex issues without finite answers and solutions, the role of communication is not simply to convey prepackaged ideals and explain necessary practices. Rather, participants, including managers, need to hear themselves talk about sustainability in order to understand what the ideal means to their particular organizations and to discover the possibilities and limitations of the ideal in specific contexts.

In sum, contestation of values and assumptions and their implied practices in contested contexts such as sustainability and responsibility is necessary to cultivate a variety of perspectives, ensure commitment among involved parties and stimulate creative solutions.

 

See further: Christensen, L.T., Morsing, M., & Thyssen, O. (2017). License to Critique: A Communication Perspective on Sustainability Standards. Business Ethics Quarterly, 27(2): 239-262.


Lars Thøger Christensen is Professor of Communication and Organization at the Copenhagen Business School, Denmark. 

Pic by alphaspirit, Fotolia.

Seeing Like a Standard: Sustainable Palm Oil and the Coasian Challenge

By Kristjan Jespersen & Caleb Gallemore.

Approximate reading time: 3-4 minutes.

Go to any supermarket and you’ll see labels, so many labels. Some of them seem reputable: the Marine Stewardship Council, the Forest Stewardship Council. Some of them seem less so, such as Bob’s House of Sustainability standard, which we just created five minutes ago.

One challenge – countless standards
Credible or not, these standards, developed mostly by the private sector and civil society, are growing in number. In Jessica Green’s 2014 book, Rethinking Private Authority, she counts 119 such environmental standards as of 2009, 90% of them created after 1990 – and this without considering Bob’s House of Sustainability. In a way, all these standards attempt something economist Ronald Coase imagined virtually impossible: to convey information about the true social costs and benefits of actions via pricing mechanisms. In this way, complex social and ecological interactions could be made intelligible to stakeholders like customers at the corner store.

The Roundtable on Sustainable Palm Oil – A Case Study
So how are such illustrious standards as Bob’s House of Sustainability put together in the first place? Like James Scott in his 1995 book Seeing like a State, we are interested in how social systems require the production of certain kinds of information. But we suspect that because the pressures on private standards for sustainability are different from the pressures on state governments, the types of phenomena standards make intelligible will be different. In other words, we are interested in what it means to see not like a state, but like a standard, using a detailed case study of the Roundtable on Sustainable Palm Oil (RSPO). Working with support from Copenhagen Business School’s Governing Responsible Business Research Environment, we are in the process of collecting data on the internal processes of the RSPO from a range of sources that include webscraping, document analysis, and interviews.

Various Adverse Effects of Palm Oil Production
There are certainly plenty harrowing problems posed by palm oil production that ideally should be readily legible to consumers: palm oil production causes deforestation and attendant greenhouse gas emissions and biodiversity loss, particularly affecting orangutan populations. Because land clearance to plant oil palm often is undertaken with the use of fire, it contributes to local air pollution and the notorious Southeast Asian haze problem. What is more, oil palm plantations often engage in exploitative labor practices, promote tenurial conflict, and can benefit local elites at the expense of others.

Lead by conservation and social justice NGOs, there have been numerous brand attacks against unsustainable and exploitative palm oil production. These have lead to such notable episodes as the successful campaign by two American girl scouts to get the manufacturer of Girl Scout Cookies to purchase certified sustainable palm oil, and the recent awareness campaign launched in Denmark by Freja Bruun, also a successful teenage environmental activist.

Reputation is Key
The founders of the RSPO intended to respond to these challenges by managing a private standard certifying sustainable palm oil production. Because initiatives like the RSPO are private rather than public, decisions about what information needs to be made intelligible are driven primarily by branding concerns. The RSPO’s reputation is critical, as it is the validity of the standard that allows it to differentiate itself from the likes of Bob’s House of Sustainability. While there have been vociferous debates about the RSPO’s on-the-ground requirements, another key concern is the traceability of certified palm oil across the supply chain. Within the standard, certified sustainable palm oil prices tend to be differentiated by the level of traceability, ranging from the Book & Claim mechanism, which acts like an offset, to the RSPO-Next system, which envisions traceability to the source plantation.

Shift in Power Balance within the RSPO
Working with several Master’s students at CBS, we have found that the RSPO has, over time, undergone a noticeable shift in the balance of power between upstream members (consumer-goods manufacturers, investors, and retailers), and downstream members (oil palm growers and palm oil refiners), as the number of downstream voting members has grown considerably (see Figure 1).

Figure 1: Composition of RSPO membership, by year (RSPO Website Data). Credit: Mikkel Kruuse and Kaspar Tangbaek.

As downstream members have become a stronger bloc, the RSPO’s intelligibility efforts have shifted from on-the-ground impacts to the traceability of the supply chain. While separate, traceable supply chains have been a stated goal since the RSPO’s founding, a noted shift is apparent. The share of total certified sustainable palm oil sold on the offset-like Book & Claim (B&C) system, for example, is declining rapidly (see Figure 2), and even B&C’s name has been rebranded to PalmTrace.

Figure 2: Percentage of total RSPO CSPO sold via the B&C system, by year (RSPO, various years).

Benefits of RSPO Membership only so good as the Label
Faced with concerted brand attacks, downstream members of the RSPO, in particular, have to overcome a public goods problem. The benefits of RSPO membership are only so good as the label, and downstream firms are understandably nervous about buying from suppliers who are cheating, exposing them to brand attacks. Faced with that risk, raising traceability requirements is one straightforward way to maintain the brand’s integrity. While enhanced traceability encourages downstream firms to police their supply chains, and geographic information systems and remote sensing are making traceability more robust, there is a monetary and policy cost to cutting through the supply-chain haze. The more traceable tiers of certification – which, with the exception of the newly minted RSPO-Next, do not involve more stringent on-the-ground requirements – are prohibitively expensive for smallholders and small businesses that must push those costs onto consumers. The desire for intelligibility, in other words, can strengthen standards, but has its own costs: first, it may focus intelligibility efforts in unproductive directions, and, second, when being intelligible involves transaction costs, only bigger players have the wherewithal to stand up and be counted.


Kristjan Jespersen primary research focus is 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. He has a background in International Relations and Economics.

Follow Kristjan on Twitter.

Caleb Gallemore is an Assistant Professor in the International Affairs Program at Lafayette College. A geographer by training, Caleb’s research focuses on land-use teleconnections and international environmental policy and politics.

Pic by JAM Project, edited by BOS.

Behavioral Insights All Over the World: A New Study from cbsCSR, CBS GRB and Harvard University

By Cass R. Sunstein & Lucia Reisch.

Worldwide, officials are employing behavioral insights to improve policies in areas that include health, finance, highway safety, employment, discrimination, the environment, and consumer protection. Some of these policies take the form of mandates, incentives, and bans, but a prominent set of behaviorally informed tools involves information, warnings, reminders, social norms, and default rules. Insofar as they steer people in certain directions without imposing significant costs, tools of this kind are called “nudges”, a term coined by Cass R. Sunstein (a CBS Honorary Professor) and Richard Thaler, one of the leading US economists about a decade ago.

Do people like nudges?
Today, more than 150 governments worldwide make use of behavioral insights and “nudges” to influence consumer behavior and consumer choices. A recent OECD report published in March 2017 presents more than a hundred examples of how they work in practice. However, not much is known about whether citizens approve of these nudges as governmental policy tools. Some work has been done in the United States and in several nations in Europe, including our own study on “Do people like nudges?”, published 2016. With the aim to provide policy makers and the public debate with empirical evidence on public attitudes towards some of these nudges, we explored the reactions from a diverse array of citizens and began to “map” people’s views across the globe. One result is that the world’s nations fall into discernible categories.

Current literature on public acceptance of nudges offers five general lessons:

  • First, citizens in diverse nations generally approve of nudges, at least of the kind that have been adopted or under serious consideration in recent years.
  • Second, citizens do not approve of nudges that they perceive to be inconsistent with the interests or values of most choosers such as a default rule by which men’s last name would automatically change to that of their wives.
  • Third, citizens do not approve of nudges that are perceived as having an illicit goal, such as religious or political favoritism.
  • Fourth, citizens object to manipulation, but they define it quite narrowly, as in the cases of visual illusions to reduce speeding and subliminal advertising (the latter does not qualify as a nudge, though).
  • Fifth, and quite surprisingly, political affiliation is generally a weak predictor of citizens’ reactions to the tested nudges.

With respect to cross-national differences, there seems, thus far, to be only one major fault line. In an impressively wide array of democratic nations, including the United States, the United Kingdom, Italy, Germany, France, and Sweden, all five lessons apply (with relatively minor variations), and citizen evaluations are unexpectedly similar. But in two nations, approval rates are significantly lower. These nations are Denmark and Hungary. To be sure, majorities in both nations do tend to approve of the tested nudges, but the level of approval is consistently lower, and in some cases, approval rates fall below 50 percent. A full explanation for these lower approval rates has yet to be provided, but greater distrust or fear of government undoubtedly provides part of the picture.

Behavioral insights all over the world
In our most recent survey from November/December 2016, we offer results from Australia, Brazil, Canada, China, Japan, Russia, South Africa, and South Korea. These nations were chosen in order obtain a broad sample of countries with diversity along several lines. We conducted representative online surveys, providing data from about 1,000 respondents per country, who were asked whether they approve or disapprove of 15 selected nudges. In order to be able to compare and enlarge the overall data set, we used the same survey instrument and largely the same methodology applied in our  earlier European study.

A general lesson is that majority support for nudges cuts across many nations with diverse cultures, political inclinations, and histories. At the same time, we find that the nations of the world can be provisionally grouped into three categories.

  • The first, consistent with the existing U.S. and European data and including several of the nations studied here, reflect all of the five lessons sketched above. Of the nations for which data are available, this is the largest group.
  • The second category, consistent with data from Denmark and Hungary, shows significantly lower approval rates; Japan now joins this category.
  • The third category, identified for the first time here, consists of nations with massively high approval ratings. China and South Korea are the current examples.

Lessons learned
For public officials, the major lesson is simple and positive: So long as the underlying end is legitimate, and so long as nudges are consistent with people’s values and interests, most citizens are offering an enthusiastic permission slip or green light. They are hardly troubled by nudges as such. Notably, the level of public support is likely to be significantly lower for mandates and bans, though of course the relevant subject area is important (people do not object to prohibitions on murder and assault).

Public approval – necessary but not sufficient
It is important to emphasize that surveys hardly tell officials everything they need to know. A full evaluation of the welfare effects of nudges, and of the underlying ethical issues, would be necessary to decide whether and how to nudge. A nudge might receive widespread public approval even though it would do little good and considerable harm – and even if it would, on reflection, raise troublesome questions on either utilitarian or deontological grounds. But insofar as officials are concerned about public opinion, they generally need not worry, at least with respect to the most of the nudges tested here.

Cross-national differences – an avenue for future research
With respect to cross-national differences, much remains to be learned. For example, we do not know whether the very high levels of support in China reflect trust in government, enthusiasm about the policy goals, adaptation to the extensive use of government power, or some form of “preference falsification”, producing misleadingly high levels of support in surveys. Nor do we know, as yet, whether many countries fall within the category of overwhelmingly pro-nudge nations, now containing only China and South Korea, or whether the category of more cautiously pro-nudge nations is small and greatly dominated, in terms of sheer numbers, by the principled pro-nudge consensus among democratic nations (as now appears). It also remains possible that some nations would show only minority support for the nudges tested here.

Read the full study here


Lucia Reisch is a behavioral economist and full professor for intercultural consumer research and European consumer policy at the Copenhagen Business School. She is also Visiting Professor at Friedrichshafen’s Zeppelin University, Germany. She is currently chairing several German and European research projects in the field of sustainable development. The main focus of her work is on consumer, health and sustainability policy, empirical research into consumer behavior (in particular sustainable consumption and production) as well as behaviorally based regulation and innovation research.

Cass R. Sunstein is currently the Robert Walmsley University Professor at Harvard. From 2009 to 2012, he was Administrator of the White House Office of Information and Regulatory Affairs. He is the founder and director of the Program on Behavioral Economics and Public Policy at Harvard Law School. Mr. Sunstein has testified before congressional committees on many subjects, and he has been involved in constitution-making and law reform activities in a number of nations.

Follow Cass R. Sunstein on Twitter.

Dirty Oil or Green Energy in the Faroe Islands?

By Árni Johan Petersen.

These are the stories from the two divided camps in the Faroe Islands – please give your take on this dilemma. Should the Faroese explore and produce oil in the Faroe Islands that will contribute to global energy safety and stability to an ever growing global energy demand? Or should the Faroese stop this process now, and rethink the current state of the world where the Faroe Islands could become the front-runner for green solutions to statuette an example, and stop the greenhouse gasses deriving from fossil fuel energy by saying no to oil?

Background
The 4th license round for rights to oil exploration in the Faroe Islands was May 17th 2017, and the search for oil in the offshore subsoil in the Faroe Islands might continue if there is an interest from international oil companies to invest in the exploration. Since the first license round in 2000 there have been conducted nine drillings in the Faroese offshore subsoil without any commercial fund but results have concluded the subsoil to have a hydro-carbon active system in place.

Today, the Faroese economy is strong, unemployment rate is close to 2 per cent, young Faroese are moving back home, population has surpassed 50.000 inhabitants for the first time, salmon industry is booming (has done so for seven years), tourism is booming (four years), and the fishery is booming. A society in prosperity where the incentives to create new jobs might be vanishing because there are no Faroese to fill in the positions and foreign workforce might become a necessary solution to keep the (capitalistic) wheels going.

Pro-oil exploration Camp
The Faroese Ben Arabo, CEO at Atlantic Petroleum, argues that the Faroe Islands should explore for oil in the Faroese subsoil. The world, he argues, demands oil and gas in large quantities because the world consumes 100 million barrels of oil every day, and the demand is increasing. Oil, as a percentage of the total world energy consumption, is decreasing but the growth of energy demand is so great that the demand for oil in quantity increases every year. Currently, he continues, approximately one third of the global energy demand derives from oil, one third from coal, and one fourth from gas. The rest derives from nuclear energy, water and other renewable energy currently supplying one-digit percentage of the global energy production.

We, who live in the privileged part of the world, Ben argues, take energy stability and security for granted while other parts of the world, e.g. India, China, Indonesia etc., do not have this luxury. Ben recommends people who think they could survive without oil should examine how long time passes before they use the first object that demands oil in its production process (e.g. tooth brush). Hydrocarbon is present in a large numbers of product ranging from mountain helmet, solar panels, aspirin, and tooth paste. The wishful thinking of “no-oil-tomorrow” is based on ideology rather than technology, Ben concludes.

Resistance Camp
For the first time since the Faroese started to dream about finding oil we are observing resistance in the Faroese community. These are mainly environmentalists who have joined forces in an attempt to stop the oil exploration in the Faroe Islands. One local NGO, Ringrás, is represented by Ingmar Valdemarsson á Løgmansbø who argues:

“The context of the opening of the fourth Faroese hydrocarbon licensing round is marked by increasing ecological turmoil and biosphere degradation stemming from anthropogenic climate change and widespread habitat destruction. Fundamentally, our global society is built upon a measure of success (unrelenting growth) which, when achieved, clashes with the integrity of the interconnected ecosystems that make life on earth viable, and thus, enable civilisation as we know it.

The challenges we face, as a country and a global community, are much greater and more fundamental than the question of energy supply alone. But nevertheless, it is evident that the energy systems of the future must, by necessity, be renewable, if they – and we – are to last. Reality is catching up with our complacency and the thwarted efforts to ditch fossil fuels and racing ahead of our expectations, but luckily on two fronts:

  1. The forecast dangers of rapid climate change are showing themselves at an accelerated, unexpected and ominous pace.
  2. Key renewable technologies have matured to take on and render fossil fuels largely obsolete.

Focusing on the latter in relation to the former, it is entirely untimely, unnecessary and unethical for the Faroe Islands to venture into a dirty industry that would threaten the mainstays of the Faroese economy, namely the fishing industry and tourism, whilst contributing to an uncertain future in favor of very dubious short-term financial gain, prone to suffer from stranded assets as disruptive technologies coupled with global weirding and climate policy expedite the transition to a low-carbon society. This is underlined by the recent developments in India, where 14 Gt of planned coal power stations have been cancelled in May alone on account of Solar PV directly outcompeting coal.

In this environment of change, we must embrace the shift away from fossil fuels and take on the potential leading role that our national goal of 100% renewable electricity generation by 2030 promises to imbue us with. This path is what we as a country need and what the world needs and, best of all, it won’t cost the world.”

According to Ingmar the Faroe Islands, the Faroese Government, has signed the Paris Agreement (COP21) which includes lowering the carbon emission to decrease the global warming.  The Faroese Minister of Industry and Foreign Affairs, Poul Michelsen, has also publically stated his support to the agreement and the Faroe Islands should be the frontrunner in the battle against fossil fuel emission adding to the fire of global warming. The long term perspective, according to Ingmar, is that this will be the sustainable solution regarding environment, society, and economics because the Faroe Islands are heavily dependent on their fisheries, salmon farming, and tourism. Oil industry will add to the carbon quantity in the natural environment and changes in the ecology will alter the livelihood of the resources in the sea. This, in turn, will negatively affect the natural resources in the Faroe Islands harming the economy and society in the long run. Exploring for oil has to stop now!

The Broader Picture
The International Energy Agency (IEA) recommends exploring for more oil in the Scandinavian area because this will provide global energy stability and security. This argument is based on the fact that the political system is transparent, and the regulation for oil activities is progressive in terms of natural environment, work processes, and overall safety. The Middle East is, according to IEA, not the most reliable nor stable area, while Scandinavian countries are triple-A-democracies, market economies and predictable partners.

Producing more oil will lower the price of oil and this automatically decreases the incentives to invest in research and development of renewable energy solutions because the energy consumer demand will, in general, follow the least expensive solution. In contrast, if the oil production is stopped the oil price will go up and the demand for alternative solutions becomes pressing and the investors will predict return on investment. This will speed up the process to develop renewable energy solutions but we will probably experience political power changes on the global arena, e.g. a stronger Middle East. The question is, for how long? The sooner the world moves to alternative energy solution the global arena will change, again, and this might be the only sustainable solution because the emission and global warming is already at a critical stage.

So, should the Faroese provide for energy stability and security, or should they be the front-runners to say “no” to oil? Could the Faroe Islands become a role model for other societies in the Arctic and beyond? And if the Faroe Islands can do this, could other countries learn from this small country? Is the Faroese political (Governmental) agenda hypocritical because of its duplicity? Or is this hypocrisy a necessary aspiration to prosper as a small society in the Arctic that might spread to other small societies in the Arctic?


Árni Petersen is PhD-Fellow at the Department of Management, Society and Communication at Copenhagen Business School. His PhD project pursues the research question: “How does future expectation of wealth deriving from the oil affect the Faroese society and the potential outcomes in the future in the Faroe Islands?” His research features an in-depth case study of the Faroese Oil Industry, including interviews, observations, and local newspaper articles about the oil industry.

You can find Árni on LinkedIn.

Pics by BSEE & Christian Reimer, edited by BOS.

Universities – Front Runners or Falling Behind The Green Transition?

By Louise Kofod Thomsen.

Universities are knowledge generators, facilitators of innovation and play a key role in shaping the mindsets and developing the skills of our future leaders.
Universities bear a tremendous responsibility for not just talking the talk, but also for walking the walk on social responsibility. However, when visiting a university campus, it is not always commonplace that we find universities in the forefront when it comes to acting sustainably and responsibly.

Universities proudly take on the role of advisors in setting universal guidelines for how others should act, but how good are they when it comes to implementing sustainability initiatives on their own campuses? The CBS campus is a wonderful place to take a stroll around, especially on a hot summer day, where you will be greeted by the sight of the students sitting on the grass and enjoying the green areas. You will quickly discover that CBS is a real Copenhagen campus with bikes as far as the eye can see. However, as with many universities, the CBS campus has a long journey ahead when it comes to implementing sustainability initiatives and decreasing CO2 emissions.

The pressure is on
Every third year, the Minister for Education and Science negotiates the new university development contracts, setting the goals for all Danish universities’ future development. The contracts contain self-defined targets by the individual institutions, reflecting their own strategic priorities as well as obligatory targets based on societal needs as defined by the Minister for Education and Science. However, until now, these contracts have mentioned no legal obligation for universities to implement sustainability initiatives on campus. Universities’ lack of focus on sustainability initiatives on campus is somewhat surprising. You would think that there should be considerable pressure on universities to show a higher degree of engagement on campus regarding sustainable development considering the growing concern and initiatives globally.

The dominating theme at Rio+20 was how to achieve environmental and social sustainable development globally. The green transition is also a leading theme for the Danish government with its ambition of having Denmark ranked as the top country worldwide for green initiatives. The green transition is reinforced not least by the recent adoption of the EU Action Plan for Circular Economy. In 2015, the world adopted the 17 Sustainable Development Goals aiming to engage governments, the public sector, civil society and universities to bring about global sustainable development and in November 2016, the Paris Agreement entered into force with 158 ratifying parties working towards the goal of staying below 2 degrees.

There is no doubt that there is a growing demand for better standards for sustainability and resource efficiency. Yet, if we are to achieve the highly ambitious global targets, we need drastic changes and stronger commitments by key actors. Considering universities’ crucial societal role in educating the generations, you might wonder what keeps universities from taking up this challenge?

CBS Goes Green – or did it?
In 2012, an initiative known as the “CBS Goes Green” was launched to, among other things, allow for waste sorting for the students at Solbjerg Plads. Today, 5 years on, waste sorting has still not been implemented at Solbjerg Plads or any other of CBS’ main buildings. This is generally explained to be due to “a lack of interest by the students”. Another explanation has been prior lack of waste sorting systems in the municipality of Frederiksberg. However, today Frederiksberg has a well-functioning system including clear guidelines as well as consultation services for correct waste sorting. With no clear strategy for handling waste (such as plastic, bio and metal) within the various CBS departments, it appears that sorting waste is difficult not only for students, but for staff and faculty as well. Despite often good intentions, the systems for sorting waste are generally lacking.

You might wonder why sorting your apple core from your paper trash is such a challenge when most do it at home. It seems as if the challenge lies within some rather old, out-of-date structures and a “this is how we have always done it” approach. Despite the fact that sustainability is a growing priority for universities all over the world placing a strong focus on teaching and research in this area, not many universities commit to integrate operational sustainability on campus.

Universities as test centers for sustainable initiatives
Universities are in many ways a powerful platform and a crucial component for achieving sustainable development across the globe, but also very importantly, locally, on campus. Universities have a responsibility as role models to lead the way and show students how to act responsibly. There are also long-term economic incentives for taking on the challenge.

In 2008, Copenhagen University adopted its first Green Campus targets and has since saved DKK 35 million on energy. The University of British Colombia is treating their campus as a living lab for students to work with behavior and innovation to develop sustainable solutions for the campus. They have launched The SEEDS Sustainability Program with the aim of advancing campus sustainability by creating partnerships between students, operational staff, and faculty on innovative and impactful research projects to be implemented on campus.

CBS has just launched a similar initiative, The Sustainable Living Lab, a project that opens up campus data for students, researchers etc. to use the campus to implement, test, research and teach sustainability with the CBS campus as the focal point (campus as a living lab). The Sustainable Living Lab project engages student organizations to create a better and greener campus, but we need CBS staff, faculty and management to contribute directly to projects like this if we want to transform CBS into a more sustainable university. However, we do see small steps towards a sustainable movement internally at CBS, with the recent establishment of the Sustainable Infrastructure Taskforce at the Department of Management, Society and Communication. Among others, the taskforce has set out to implement waste sorting using the department as a pilot project and in time use this knowledge for similar initiatives around campus.

Reflecting on CBS’ role as a business university with significant social science expertise, the unique focus of the CBS approach is its emphasis on business and societal dimensions that we can make use of for a sustainable campus redevelopment. There is a tremendous opportunity for universities to play a key role in this sustainable transition in terms of research, economical benefits and branding of universities as green contributors just to mention a few.

I believe, it is time we started redefining the role of universities in the sustainable transition and engaging students and staff alike in the journey towards creating a green campus.


Louise Thomsen is Project Manager for CBS PRME and the VELUX Chair in Corporate Sustainability at the Department of Management, Society and Communication, CBS. Her areas of interest are sustainable consumption, innovation, student engagement, education and partnerships for sustainable development. Follow her on LinkedIn and Twitter

Pic by Bjarke MacCarthy.

CBS new Knowledge Partner of the OECD

By Karin Buhmann.

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

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

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

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

By Karin Buhmann, Copenhagen Business School

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

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

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

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

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

 

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

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

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

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

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


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

Pic by Solidarity Center, edited by BOS.

What if unethical behavior is just matter out of place?

By Anna Kirkebæk Gosovic.

It’s always puzzled me why it is that we might share words and concepts but that the meaning we fill into these concepts is very different. Kinda like a hotdog. Danish hot dog makers enjoy to fill it with important hotdog defining ingredients such as remoulade, mustard and pickles, whereas rumor has it that Swedish hot dog makers put a shrimp-mayo substance (the horror) on their hot dogs, and American ones don’t even put ketchup (seriously, just a bread and a sausage?).

Anyways, the point is that Danes, Swedes and Americans all call it a hotdog, although they don’t agree on what it actually consists of, what is right (onions and pickles of course) and what is wrong (shrimp-mayo, obviously). Banal observation, perhaps, but don’t worry – there is a point (also, you have to bear with me, as I’m a brand new PhD student and not yet as clever as the other bloggers).

Schooled as an anthropologist, I recently started my PhD study on how to ensure ethical standards within a multinational pharmaceutical corporation. As a point of departure, and trying to map out how corporations deal with this challenge, I started consulting the literature on business ethics in cross-cultural contexts.

As I read along, I realized that scholars (and companies) actually seem rather sensitive to cultural differences, and that local responsiveness to cultural norms and practices is considered beneficial and even necessary in many aspects of business operations. However, at the same time, within the field of business ethics, what may be otherwise recognized as cultural differences to be respected and responded to, seems here to somehow transform into unethical behavior not to be tolerated.

Take for example the reciprocal systems of dinner invitations, gift giving and thorough social interaction that comprise an inherent part of establishing relationships in parts of South East Asia. This can be interpreted as a cultural practice of creating good business relations. However, in a business ethics context, most (Western) ethical standards do not allow for e.g. gifts or expensive dinners to enter business relations. In these contexts, they do not keep their cultural label as gifts form the context in which they originate. Rather, they get a new cultural label from the context www.buy-trusted-tablets.com of Western ethics as something resembling corruption.

So – how can gifts (which for most of us has positive connotations) suddenly become corruption (which for most of us has negative connotations) when entering a business relation governed by Western principles for right or wrong? The answer might lie with an anthropological classic on purity and danger.
In her famous work on dirt, anthropologist Mary Douglas argues that notions of dirt express symbolic systems within a culture. Efforts to get rid of dirt, she writes, are not governed by an anxiety to escape disease. Rather, we are reordering our environment, making it conform to an idea that we share within our culture of what is dirty and what is not.

In my early years as an anthropology student, one lecturer explained Douglas’ theory like food on the shirt. In my opinion, an amazingly pedagogical way of explaining a basic anthropological theory which I will attempt to repeat:

It’s really rather simple. It’s about food and dirt. Perhaps the aforementioned hotdog should reenter the scene here. The Danish one with all the sauces, of course. While this hotdog is in your hand, it’s food. It’s a mouth watering hotdog just waiting to be eaten. But when you drop some of it (and believe me, you will) onto your shirt, it is no longer food. It’s dirt. Thus, the entire nature of a thing or a concept can change completely according to the context in which it is located and our culturally embedded understandings of that context’s rights and wrongs (hotdog in hand = good, hotdog on shirt = bad).

Douglas introduces the concept of matter out of place, which is a conceptualization of the ways in which we interpret the things we are exposed to and the understanding of where they belong. The hotdog belongs in your hand and not on your shirt. Therefore, when the matter of the hotdog is on your shirt, it transforms its qualities from being a hotdog to being dirt. It’s matter out of place.

Tongue in the anthropological cheek, I find it interesting to ask the business ethics community: What if the same goes for business ethics? What if all the things we consider unethical are merely not conforming to an idea we share within our culture of what is right and what is wrong? What I the logic governing the notion of say, e.g. bribery is similar to the notion of food and dirt: gifts in a local cultural system = good, gifts in a business relation = bad?

And if we try to conceptualize business ethics in this way – what does that do to our understanding of unethical practice? Would that be a move towards moral relativism? Or merely an attempt open up for a more nuanced approach to business ethics where we can also explore the ethical actions that companies take which do not conform to our (Western) understandings of rights and wrongs? Would that dilute the ethical principles of corporations? Or would it break a Western ethical hegemony? Is unethical behavior really just matter out of place? And lastly, is such an approach even manageable for corporations on a practical level?

I don’t know. But I will surely think about it some more.


Anna Kirkebæk Gosovic is PhD student at the Department for Management, Society and Communication at Copenhagen Business School. She is working on how to ensure ethical standards within a multinational pharmaceutical corporation.
Pic by Pixabay

Business integrity, ideas and developments in the ASEAN way

By Luisa Murphy.

As a former employee of the United States Department of Justice Antitrust Division, I worked on corruption cases involving companies accused of both collusion and bribery. However, when these cases crossed borders, enforcement of US laws became particularly challenging. It also raised questions about the relevance of US Federal laws in regions of the globe such as Asia where different ‘national business systems’ (Witt & Redding, 2014) prevail. Today, through my PhD studies on the institutionalization of CSR, I find myself considering some of these same questions informed from the vantage point of the Association of Southeast Asian Nations (ASEAN).

Corruption in ASEAN

As with other areas, the ASEAN region has not been immune to the effects of corruption involving national, regional and transnational actors. One need look no further than the recent UK Rolls-Royce bribery scandal (which was settled for £671m) and moreover, implicated Thai Airways for taking bribes. The front page scandal involving the discovery of $1 billion dollars in Malaysian Prime Minister Najib Razak’s personal bank accounts which was allegedly taken from the state investment fund 1MDB has also directed attention to the region.

Thus, it is no secret then that the ASEAN region, in common with others around the globe, suffers from corruption issues and that this presents a major challenge to its socio-economic development. For instance, in 2015, Transparency International reported that ‘rampant corruption across the region threatens to derail plans for economic integration’ (Transparency International, 2015), while 7 out of 10 countries in ASEAN ranked 40 or under (100 is a perfect score) in Transparency International’s 2016 Corruption Perceptions Index. As a result, international, regional and national organizations have rallied together to confront these issues. And although the region still may be experimenting with different approaches, there appear to be a few distinctive ASEAN strategies which are taking hold and may very well, provide informative lessons for the future. A recent conference in Singapore organized by the ASEAN CSR network (a regional hub and leader on CSR issues which connects international, regional and national networks), brought a few takeaways to the forefront.

Triggering business integrity

Elements of hard law may be an important tool in inducing adherence to international soft-law frameworks such as the United Nations Global Compact (UNGC)’s 10th principle on Anti-Corruption, Goal 16.5 of the 2030 Agenda for Sustainable Development and the ISO37001 anti-bribery management system among others. For instance, one company executive who participated in the Singapore conference captured the applicability of hard law enforcement approaches in relation to other CSR issues e.g. health and safety standards, by noting that workers in one country in the region didn’t take compliance seriously until they were fired for not wearing safety hats. This resulted in ‘triggering’ compliance with health and safety standards thereafter. In the case of Singapore, prohibitions such as littering in public places, jaywalking or chewing gum on the street have been particularly effective in engendering behaviors which need not be enforced in the long-run. Thus, an approach which utilizes elements of hard law in conjunction with binding international frameworks such as United Nations Convention against Corruption and the UK Bribery Act as well as regional frameworks (e.g. ASEAN 2020) may be an effective means to trigger adherence to soft law frameworks in the future.

Culture as an opportunity and not an excuse   

Corruption is not necessarily an ASEAN region cultural problem per se and certainly many positive aspects of the regional culture can be harnessed to fight corruption. While gift giving in the form of bribes may have previously been (or in some cases currently) is a ‘cultural norm’, it can also be argued that many companies operate with a spirit of business integrity. Although, it would be naive to say that the ethos of business integrity is inherent in every company, behavior and culture are different, and issues of corruption may be related to governance issues or other factors rather than ‘culture´ itself. Notwithstanding this, cultural norms such as the fear of ‘losing face’ have reportedly been successfully employed in efforts to pressure CEOs into implementing anti-corruption initiatives. The Thai Collective Action Coalition (CAC) is one such example of a private-sector initiative which has been particularly successful in combating corruption in Thailand, perhaps because it reportedly operates with a mindset which utilizes international frameworks such as Transparency International’s UK (TI-UK) Adequate Procedures Checklist while tapping into ASEAN cultural norms of e.g. ‘losing face’ to ensure that Thai CEOs join the initiative. Therefore, energies in the future might focus on norms which are counter to corruption rather than daunting conceptualizations of assumed ‘cultures’ of corruption.

Youth and SMEs as engines of business integrity

Finally, approaches to combating corruption are increasingly focusing on youth and SMEs and using them as indicators for progress on the issue. In the ASEAN context, this has meant mobilizing and providing resources which can contribute to business integrity among the youth population and also small and medium- sized enterprises (SMEs). While this may seem like a ‘no brainer,’ ASEAN countries and international organizations are still clarifying their approaches. For instance, whether there will be enough ‘trickle-down’ from top-down approaches which deliver e.g. training via multinational corporations (MNCs) or whether a bottom-up approach is necessary is still being debated. Moreover, while the youth of many ASEAN countries have good intentions, they are often derailed due to economic or familial concerns. For instance, a 2014 Transparency International report indicated that while honesty is more important than wealth to 94% of the youth in Vietnam, 41% are “willing to lie for the sake of family income or loyalty to family.’ (Transparency International, 2014). Despite these figures, we should remain optimistic given the integration of youth into CSR activities and the overall focus on reaching SMEs in the region (topics for another blog).

In conclusion, only time will tell how ASEAN triggers business integrity, uses culture as an opportunity and mobilizes youth and SMEs in the battle against corruption. I, for one, see promise in these developments and ideas which might just become part of the ASEAN way.


Luisa Murphy is PhD Fellow at Copenhagen Business School and supported by the VELUX Endowed Chair in Corporate Sustainability. Her research examines the governance of corporate social responsibility. She brings a human rights and business background from the University of Oxford and legal experience from the Antitrust Division of the United States Department of Justice.

Pic by  Transparency International Indonesia

Digitally Dominant Corporations

By Glen Whelan.

On Friday the 26th of January, Denmark’s foreign minister Anders Samuelsen announced that Denmark is to appoint the world’s first ‘digital ambassador’. In an interview with Politiken, and as reported by The Local, Samuelsen explained the decision by noting that digitally dominant “companies like Google, Apple and Microsoft ‘affect Denmark just as much as entire countries… These companies have become a type of new nation… and we need to confront that’”. Whilst Samuelsen was careful to note that Denmark “‘will of course maintain our old way of thinking in which we foster our relationships with other countries’”, he emphasized that “‘we simply need to have closer ties to some of the companies that affect us’”.

A Contentious Trend

Whilst Denmark appears to be the first country to so formalize relations with digitally dominant corporations, the conceiving of corporations as being state like is not particularly new. In 2016, for example, Foreign Policy magazine named Google as its ‘Diplomat of the Year’ due to its “digital diplomacy” and its “empowering citizens globally”. And approximately ten years prior to this, there was a spate of works suggesting that multinational corporations were beginning to take on increasingly state like responsibilities for individual citizenship rights, and that it was multinational corporations that were the new Leviathans of our time.

This trend to conceive of states and corporations as being on something like an equal footing, however, has often been criticized. Forbes contributor Emma Woollacott, or example, chastised Samuelsen for implying that if an organization amasses enough money, then it can “get a government to give… [it] not only special attention but a unique political status”. She thus suggested that whilst “appointing a senior official tasked with negotiating with tech companies makes a lot of sense, equating those companies with nations sets a rather worrying precedent”. In echoing what is now the decade old claim that corporations would likely seek protection “against arbitrary interference and expropriation by governments” for taking on ‘governmental’ responsibilities, Woollacott worries that equating corporations with governments will simply increase the power the former have over the latter.

A Symbolic Turn

In contrast to such normative concerns, Copenhagen University’s Martin Marcussen suggests that the Danish government’s planned appointment of the world’s first digital ambassador will be little more than symbolic. According to his understanding of the Foreign Ministry, “the ambassador will get an office, practically consisting solely of that individual. He or she will… be able to travel around, but it’s just one person, so one can’t expect too much’”.

In and of itself, this statement is difficult to argue with. Nevertheless, it risks obscuring the digital ambassador announcement’s important, albeit largely implicit, suggestion, that it is not corporate power in general that we need to be wary of, but the power of high-tech digital corporations in particular. The first point to take away from recent developments, then, is that the Danish government’s recognition that digitally dominant corporations have a significant impact on the life of Danish (and other) citizens is well founded.

The second and more important point to take away, however, is that we risk misunderstanding the uniqueness of such impacts by trying to conceive of digitally dominant corporations as governments, or by conceiving of their unique political status as arising once governments recognize them as ‘equals’. Indeed, the unique political importance of such digitally dominant corporations is clearly diminished by such an equating.

In other words, when we equate digitally dominant corporations with governments, it tends to take attention away from the fundamental, multitudinous, and technologically informed, ways, in which they (indirectly) shape what we consume, discover, experience, forget, and remember, on a daily basis. If Denmark’s digital ambassador announcement helps us recognize as such, then it will prove to be a very good thing.


Glen Whelan is Governing Responsible Business Fellow at Copenhagen Business School and Social Media Editor for the Journal of Business Ethics. He’s on twitter @grwhelan and @jbusinessethics.

Pic by cea +, Flickr, edited by BOS

US versus Him

By Catarina Pessanha Gomes.

The past months constituted the culmination of a sequence of events, completely unthinkable even one year ago. These events led to the inauguration of a man that many consider unfit for its position, a man demonstrating unprecedented levels of intolerance, bigotry and racism, a man questioning the foundation of our political system, separation of powers, free press, equality of rights, one tweet at the time.

Like many of us, my heart has been hesitating between a deep state of anxiety for its future decisions and a slight nausea when looking at its proclamation as Time’s person of the year. Yet, this got me thinking about the incongruity of reducing a whole sequence of events, times, peoples and places to a single individual, a troubled reflection of the individualistic tendencies of our societal and political system. While not dismissing the reality of asymmetrical power relations, the emphasis of this post is placed on the anonymous mass, the hidden collective power often forgotten by our political system, but also in our academic fields.

The common, collective, anonymous power is often left unstudied at the profit of the single individual, be it the President, the CEO or, in my academic field, the entrepreneur. Hence, I decided to put aside the overwhelming amount of research focusing on the personality of these special, heroic individuals, constituting a popular narrative of uniqueness and success, focusing instead on organizational studies calling for a comprehension of entrepreneurship in its everydayness, as a societal process with multiple actors and stakeholders rather than an individualistic phenomenon.

The sociologist Richard A. Peterson and Pardo´s studies open the door for considering entrepreneurship not as a special person or situation, but as an action commonly shared that can occur anytime. In this regard, the latter put forward a perspective on entrepreneurial moves through which citizens, here the popolino of Naples, create new possibilities in life, situating entrepreneurship beyond formal economy.  Recognizing this collective entrepreneurial action is the first step towards serious political changes, as our democratic system needs to be modified to recognize, listen and integrate this common potential in the political game as a legitimate form of power.

Lyotard states that the world is composed of events giving rise to multiple interpretations, and maybe I really needed a new storyline to help me cope with the current events; maybe I could not make sense of Donald Trump as the final expression of what our society can produce. Nevertheless, for the next four years, I will keep in mind that politics also lies on the everyday, collective power that change society in the shadows, the men and woman giving a hand, creating, collaborating, in organizations or in the anonymity of their own houses, making “US” the people of the year, one action at the time.


Catarina is a PhD Fellow at the Department of Management, Society & Innovation at Copenhagen Business School. Her PhD project investigates partnerships between social entrepreneurs and public institutions, with a particular focus on how social entrepreneurship can be institutionalized.

Pic by the Office of the President of the United State

Trumpism: On the road to state capture?

By Hans Krause Hansen

The inauguration of Donald Trump as President of the U.S. has caused widespread concern. On the long list of worries is Trump’s approach to corruption. With his business empire including hundreds of legal entities across the world, conflicts of interests will pile up.

Corruption is about office holders’ misuse of public office for private or organizational gain, and it has a wide reach. Grand corruption involves the collusion of networks of economic and political elites across national borders. Powerful corporate actors make business deals with political and administrative leaders at various levels, if not directly, then through intermediaries. While always difficult to document due to the secrecy of the deals, we only need to recall the Oil-For-Food and Siemens scandals to confirm that such things indeed take place on a massive scale.

Historically the U.S has suffered from various forms of grand corruption, like any other country. But U.S. governments have also come to play an important role in attempts to curb it. The country pioneered the prohibition of corporate bribery of foreign public officials, and many countries have followed suit. U.S engagement in anti-corruption, and anti-corruption itself, has been subject to controversies. But there is growing acknowledgement across the world of the damaging effects of corruption on economic affairs and trust in political and administrative institutions. Human rights, security and the environment are all affected negatively by corruption.

What are the policies to expect from Trump and his new administration on these matters? Of course we don’t know yet, but there are certainly issues to keep an eye on in time to come.

Conflicts of Interest

During the electoral campaign and as president–elect, Trump waged a war against corruption. Framed in the now well-known Trumpian elite vs. people metaphoric, its primary target was the Washington establishment.

But there are good reasons why Trump better begin to clean up his own house. Just before inauguration Trump explained his plan for how to separate his business empire from the work to be undertaken from the Oval Office. His decision not to create a blind trust for his assets, as well as the appointment of his closest relatives to run the Trump Organization instead of an independent board have been met with widespread suspicion Even from those who speculate it’s unfair that entrepreneurs involved in public life can ultimately be required to liquidate their business have lamented the absence of arms length.

So too has the general lack of transparency in Trump’s tax returns. Two days after his inauguration, WikiLeaks tweeted that “Trump’s breach of promise over the release of his tax returns is even more gratuitous than Clinton concealing her Goldman Sachs transcripts.” The organization has called for someone to blow the whistle.

Walter M. Shaub, Director of the U.S. Office of Government Ethics has stated that Trump’s plan for avoiding conflicts of interest “does not comport with the tradition of our Presidents over the past 40 years.” Since the Watergate scandal, maintaining business while in office has been seen as ethically irresponsible and against the law. Moreover, it sets a very bad example: “The signal a President sends set the tone for ethics across the executive branch. Tone from the top matters.”

Following his statements, Shaub was called to testify before lawmakers in the House of Representatives, a step seen by many as a threat to his office.

The Emoluments Clause

With his family running the business empire, the President will of course be able to interfere directly in it. But he can also come under unduly influence of foreign powers, some of whom may already be enmeshed in it.

But the U.S. Constitution, as well as federal statutes that address nepotism, bribery and so on, forbid office holders to accept presents and other services from foreign powers. Legal scholars have discussed why and how in a recent study of the so-called Emoluments Clause of the U.S. Constitution. While many transactions between the Trump empire and foreign powers will probably not involve “actual impropriety”, it is “a virtual certainty that many would create the risk of divided or blurred loyalties that the Clause was enacted to prohibit.” In a situation “when there is overwhelming evidence that a foreign power has indeed meddled in our political system, adherence to the strict prohibition on foreign government presents and emoluments ‘of any kind whatever’ is even more important for our national security and independence.”

State capture

So the fear is not only that Trump’s business liabilities may affect how he deals with the banks to whom he owes hundreds of millions of dollars in debts, but also how he will approach foreign countries that become business partners or seek special favors. Worst case, Trump’s presidency may lapse into state capture, a term referring to the systemic corruption of business and politics relations. Individuals, organizations and interest groups, domestic or foreign, can come to have disproportionate influence over policies and regulations emanating from the Oval Office and the administration.

Tools for state capture include the buying of laws and decrees, illicit or disproportionate contributions to political parties and groups, manipulation with electoral processes, illegitimate lobbying and revolving door commitments, and not least, through friendship, family ties and intertwined ownership of economic assets. State capture has many facets. It is often related to the illicit financial flows characterizing particular industrial sectors with profound economic and political power asymmetries. Some sectors are high risk, such as the extractive industries.

State capture and its associated processes of favoritism, bribery and blackmailing will need much more attention in the future. Especially the recent mobilization of digital technologies, hacktivism and cyber wars in the election of Trump draw attention to the increasing sophistication of the tools being used. The unknowns of Trump’s business ties to geopolitical adversaries and allies across the globe, together with the skillful use of digital technologies to manipulate global publics, will hopefully prompt investigative journalists and researchers to scrutinize what is going on and what to do.

Adiós FCPA?

A final set of speculations focuses on Trump’s stance towards the U.S. Foreign Corrupt Practices Act (FCPA), a legal cornerstone in the history of international anti-corruption. The FCPA was signed into law in 1977 after the Watergate scandal. It has extraterritorial reach and prohibits U.S. corporations from bribing officials of foreign governments in order to obtain business. The FCPA has inspired legal initiatives elsewhere, including the recent U.K. Bribery Act and important international anti-corruption conventions under the auspices of the OECD and UN, amongst others. Anti-corruption efforts by the World Bank and the International Monetary Fund all echo various aspects of the pioneering FCPA, all of which tie into the much broader work of the world’s leading civil society organization on anti-corruption, Transparency International.

Since 2004, U.S Authorities have scaled up FCPA enforcement, targeting U.S companies and foreign companies. The FCPA is one of the key reference points for the increasing development and implementation of corporate compliance programs in multinational companies worldwide.

But will this continue? In 2012 Trump stated that the FCPA is “horrible law and it should be changed”, and also that it puts U.S. companies at a “huge disadvantage.” That fits with Trump’s preferences for U.S companies winning and his disdain for moral niceties.

However, let’s all take a deep breath when it comes to FCPA enforcement in the Trump Administration, as writes the FCPA Professor, a website that deals extensively with legal issues relating to corruption, anti-corruption and other interesting matters. The fate of the FCPA will depend on the more precise composition of the agencies responsible for the FCPA, bureaucratic inertia and a lot of other priorities. The FCPA Professor further notes there are probably “too many people making lots of money based on the current FCPA enforcement environment for FCPA enforcement to experience a sudden dramatic change.” Anti-corruption has become an industry, a profession, with lawyers, accountants, compliance officers and CSR consultancies making a living by providing expertise. No wonder that corruption has come to be seen as a risk to be managed, even by corporations themselves.

In conclusion, there are many reasons to be worried about what comes next from Trump in matters relating to corruption and anti-corruption. We are indeed in a phase of massive uncertainty and confusion, with unpredictability reigning, also in this area. Notable exceptions in the business of prophecy certainly do come around now and then, but not always for the good.


Hans Krause Hansen is Professor at the Department of Management, Society and Communication, Copenhagen Business School. He teaches and researches about various aspects of public and private governance, including corruption, anti-corruption and transparency regimes in the global North and South.

Pic by Chris Potter, Flickr

The CEO President

By Dan Kärreman.

President Trump is going to be different. So far most of the commentary has been focused on him as a trailblazer for white nationalism and populism, and for his unique personal qualities. This is understandable, since the marriage between white nationalism and populism was dissolved in 1964 in the USA when the Democratic party finally took a long hard look on its racist past and decided to become the party of civil rights, thus fracturing the mix of white supremacy and New Deal policies that had ruled the South since the implementation of the New Deal. And as for president Trumps personal qualities… let’s say that we can expect unorthodox and colorful commentary on that front for the next four years.

Can Trump’s business habitus compensate for a lack of experience in government & politics?

One aspect of Trump that has been overlooked is that he has no previous experience of government and politics. To the extent it has been an issue, Trump has largely managed to make this a point that has worked to his advantage as it has given him credibility in claiming that he is not part of the (corrupt) establishment. His celebrity has also compensated for the lack of name recognition that normally would hamstring the outsider candidate. But his lack of experience of government and politics is likely to have a profound effect on how he will operate as a president.

On the other hand, Trump has considerable experience of being a business president. He has worked a business executive for more than 35 years. In Bourdieuan terms, this is his habitus. Being a business executive is different (but not completely different) from being a politician. It is worthwhile to have a closer look on what we can expect from a business executive.

Authoritarian, KPI-driven and delegating responsibility

First, executives run on hierarchy. As an executive, it is a given that you have say-so in your domain. Operationally, this is perhaps not different from politicians who also mostly work in hierarchical arrangements. However, as a politician in a liberal democracy you must internalize the idea that you represent a constituency and at least pay lip service to the fact that power comes from the people. Not so for an executive, where power comes from the guy above you in the hierarchy. Fact is that executives are not only comfortable in authoritarian set-ups, they thrive on it. The authoritarian aspect of Trump’s persona is perhaps the most grating one for the political class, where such tendencies are expected to be suppressed. They are unlikely to be troubling for most of the electorate though, since most people interact more frequently and more comfortably with executives than with politicians in everyday life.

Second, executives are driven by a narrow set of key performance indicators. The indicators can be played to some extent but they are also real in the sense that they operate as grading mechanisms for performance. Expect Trump to identify a narrow set of deliverables that he will insist to be evaluated upon. The most likely candidates are immigration (or rather deportation), trade, nominating socially conservative judges for the supreme court and infrastructure spending. Having said that, Trump is probably open for negotiation on this point. He does not appear to be particularly ideological (apparently, he has changed his party affiliation 5 times the last 15 years) but he would insist to have indicators that makes it possible to claim success. Success is very important for executives.

Third, executives delegate. This goes beyond the idea of the fact that it is impossible to be experts on everything. Executives are strong believers in the division of labor, in fact the whole idea of an executive is built on division of labor, and are comfortable in pushing out responsibility to subordinates. Delegation offers possibility for subordinates to prove themselves and to further their careers, thus creating bonds of loyalty between executives and subordinates. Politicians delegate too, but the career aspect of delegation is less pronounced. Politicians delegate to increase representativeness and to invite expert commentary. Put bluntly, executives delegate for reasons of expediency while politicians delegate for reasons of deliberation.

A Business presidency

Overall, we can expect a presidency that will work more like a business presidency than the typical political presidency. The authoritarian aspects of the business president are likely to be an ongoing source of frustration, since the US presidency in actual reality is a weak office with a lot of checks and balances (foreign policy is an exception but Trump does not seem very interested in this area). The importance of projecting success is likely to make the Trump presidency prone to unpredictable policy shifts. Finally, the promotion of expediency will open for a lot of semi-scandals and crypto-grafting since it promotes a potent but problematic mix of loyalty, initiative and patronage, qualities that sits uneasily with the ethos of public government.


Dan Kärreman is Professor in Organization and Management Studies at the Department of Intercultural Communication and Management at Copenhagen Business School. He is on Twitter.

Pic by Steve Baker, Flickr

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

By Andreas Rasche.

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

Non-Business Participants Delisted After Three Years

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

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

Delisting as an Opportunity and a Problem

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

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

What Bothers Me Most is…

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


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

Pic by emilydickinsonridesabmx

CSR as Power in Global Governance. The Anti-corruption policy of Danish Companies in China

On Tuesday 29 November 2016 Anestis Keremis will give his first WIP seminar with the title:

CSR as Power in Global Governance. The Anti-corruption policy of Danish Companies in China

When: Tuesday 29 November 2016 from 10:00 – 12:00

Where: Porcelænshaven 1, 1.04, 2000 Frederiksberg

Discussants:

Professor Hans Krause Hansen, Head of OMS, Department of Intercultural Communication and Management, CBS

Associate Professor Steen Valentin, Department of Management Politics, and Philosophy, CBS

Supervisors:

Associate Professor Antje Vetterlein, Department of Business and Politics, CBS

Professor Jeremy Moon, Department of Intercultural Communication and Management, CBS

If you would like a copy of the paper to be presented, please e-mail Anestis Keremis ( ake.dbp@cbs.dk ).


pic by baaghi

Democracy Trumped – Understanding Trump’s Propaganda

By W. Lance Bennett.

How did a brand magnate reality TV star with a vindictive style and no political experience become president of the United States? Why did so many people vote to ignore climate change, pull back from the global economy, and disrupt North Atlantic relations?

A few years back I asked a colleague in Italy to explain Berlusconi. He pointed to a corrupted and dysfunctional political system that angered voters enough to throw a bomb into government. Never mind that Trump, like Berlusconi, oozes a special corruption all his own. Most of the press and party elites missed the scale of angry emotion aimed at them by white working and middle class Americans. Indeed, the cosmopolitan press had long rendered these folk nearly invisible, brushing off the early warning signs of the Tea Party as a minor disturbance. And so, most media experts and party insiders engaged in knowing discussions of how impossible it would be for anyone to be elected with Trump’s combination of inexperience, shady business dealings, and inability to manage his emotions and stay on script.

Winning votes through Marketing: emotio, not ratio

Meanwhile, Trump found and fed the white anger with simple, emotional messages, such as the promise to “drain the swamp” in Washington. He branded “Crooked Hillary” as the ultimate insider, with close ties to the banks, a trail of (largely manufactured) scandals, and trouble drawing a line between official business, the Clinton Foundation, and her ties to Wall Street. Despite the baggage that Clinton carried through the campaign, she did win the popular vote, and might have won the election had the (Republican) FBI director not renewed an investigation of her handling of official emails as Secretary of State.

This was the “October surprise” that sent many undecided voters, including a majority of white women, to Trump. Clinton tried in vain to get policy messages into the news, but Trump dominated the daily media spectacle with tirades against immigrants, government corruption, establishment politicians from both parties, the press, and the global economy. His clarion call at rallies was “I am your voice.” When he mentioned Clinton, the crowds ritualistically chanted “lock her up,” which he promised to do. Reporters were herded like cattle into fenced pens at rallies, and crowds shook their fists and chanted at them when Trump  denounced the lying, biased media. Reporters needed Secret Service protection at these events.

A radical right social movement against the Establishment

Through his deft use of social and conventional media and relentless appearances at rallies, Trump created a movement that revealed, like Bernie Sanders in the Democratic primaries that selected Clinton, the emptiness of the US party system. The Trump revolt echoes the rise of the radical right sweeping European democracies. Traditional parties have become “hollowed out,” in Peter Mair’s term, uninterested in engaging voters beyond crude marketing campaigns at election time. The British felt this shock with the Brexit vote, and no fewer than 28 countries in Europe have radical right parties on the rise, or already in power and threatening basic democratic values. Even though the radical left is as numerous and angry as the right, it is burdened with identity politics and the romance of deliberative democracy, which undermines conventional party organization, leadership, and the capacity to generate appealing ideas that travel via simple emotional messages.

How cosmopolitan arrogance lost the election

The specter haunting democracy today is the legacy of centrist neoliberal elites, and the press organizations that cover them. The core democratic institutions of press and politics have failed to engage white working class populations that have been economic casualties of globalization. Perhaps even more troubling is the failure of the center left and right to engage white middle classes who are more the symbolic casualties of globalization. These are the god fearing Christians for whom racial and patriarchal privilege once offered social identity and status, and who now feel threatened by multiculturalism, immigration and Islam. Yet, neoliberal politicians from Tony Blair to Barack Obama have told them that globalization is irreversible, so get over it. Clinton’s message of “stronger together” surely felt wrong to those who lived in Trump’s America and wanted to make their nation great again – in their own image.

Popumisms  greatest weapon is propaganda supported by social media

Beyond the lying mainstream press, which Trump helped his followers deconstruct every day, Trump’s coded messages of resurgent white nationalism circulated through the alternative or “Alt” right media system in the US. This network includes radio talk personalities such as Rush Limbaugh, with 13 million listeners, who issued daily defenses of Trump’s many miscues in the final months of the campaign. Among hundreds of Alt right websites is Breitbart with 19 million unique monthly visitors.

Late in the summer, when struggling with self-inflicted damage in the establishment press, Trump picked Breitbart publisher Steve Bannon to head his campaign. The campaign media team was soon joined by Roger Ailes, who began his political career reinventing Richard Nixon for the television age, and later headed Rupert Murdoch’s Fox News channel until he was driven out by a sexual harassment scandal. Bannon and Ailes have visions of consolidating their victory by forging a Trump media network that will serve as a surrogate party organization, and bypass the mainstream press in keeping Trump propaganda flowing to supporters.

A new order?

In light of these trends, it is time to ask: What is the future of democracy given the imbalance between left and right, and the disdain shown by many victorious right politicians for civil liberties, moral tolerance, racial, sexual, and religious diversity, press freedom, and basic civility? Those of us who benefit from cosmopolitan societies and global economies have failed to notice that democratic institutions of press and parties have withered, while a new and more ominous political and communication order has emerged in our midst.


Lance Bennett is professor of political science and Ruddick C. Lawrence Professor of Communication at University of Washington, Seattle USA. His most recent book is News: The Politics of Illusion (10th Edition, University of Chicago Press). He is also founder and director of the Center for Communication and Civic Engagement. and is on Twitter.

pic by aux

Rising Inequality and Political Backlash

By Kate Grosser.

Widening income inequality has become the defining challenges of our time. Not only has this issue been highlighted in recent years by the IMF, the OECD, and the Economic Policy Institute, Washington, among others, but it is at the centre of much analyses of the causes of Trump’s US election victory, including Dirk Matten’s great blog on this site last week. The gap between the rich and poor is reportedly at its highest level in decades in advanced economies. While this trend has been more mixed in emerging markets and developing countries, pervasive inequities remain, and it is increasingly recognized that inequality impacts negatively upon growth, sustainability and political stability.

Contesting the Equality and Gendered Value of “Creating Shared Value” is an urgent task

So what does this tell us about our success in ‘Creating Shared Value’? It would seem we urgently need to pay a lot more attention to what we mean by ‘shared’ and, in particular, to how corporate practices impact upon inequality at all levels of society, across all stakeholder domains, and in the wider economy and polity. Notably the IMF confirms that gender inequality is strongly associated with income inequality and that this holds for countries across all levels of development. Thus we live in particularly challenging times for gender equality. How are we going to address these challenges more effectively?

Corporations have been shown to rely on gender and other forms of inequality as a resource, exploiting women’s low pay globally, and especially in supply chains in developing countries for example, and relying upon invisible and unpaid care work, done mostly by women, to sustain workers and organizations. However, it is also true that business has the power to make changes that can impact huge numbers of women, as well as men, in positive ways through new business models and new approaches to responsible business. Yet, corporate claims to be advancing equality MUST be investigated and evaluated by feminist scholars, and others working on different forms of inequality, in collaboration with the so called ‘beneficiaries’ of CSR, to assess progress in this regard.

Emerging research on CSR, gender, and other forms of inequality – what are we learning?

Among the growing research outputs on inequality issues and CSR, including those addressing gender, development, and indigenous studies, many have raised questions about the nature of shared value. They have also frequently suggested ways forward on this issue, including the need to listen to, and act upon, knowledge that comes from the ‘margins’ of our field, and of mainstream society. However, while such research in CSR is more critical than ever, the impact of this work, in terms of research and practice, will depend to a large extent on levels of interest among CSR scholars in addressing inequality in our midst. A quick review of feminist scholarship for example, reveals that this routinely develops alongside, rather than as part of, mainstream theory and research, such that it is effectively ignored, its implications overlooked and its insights missed (e.g. Shanley and Pateman, 1991). In our own field Janet Borgerson (2007) finds that feminist ethics has been consistently overlooked, misunderstood, and improperly applied within business ethics. In our new edited collection on Gender and Responsible Business: Expanding CSR Horizons (Editors: Kate Grosser, Lauren McCarthy and Maureen Kilgour, Greenleaf 2016), Laura Spence points to low citations of feminist research, even that by the leading professors in our field such as Ed Freeman. Craig Prichard (2013) proposes that ‘uncitation’ does not prove that a paper is of poor quality, but rather that it is separated from the ‘dominant co-citational coalitions’ of a particular group of powerful scholars and journals. He suggests we seek out uncited papers to find new areas of importance to our field. In sum, advancing CSR research on gender and other forms of inequality will require all of us to:

  • Support and mentor those who write from the margins of our field, including women academics from a variety of backgrounds and parts of the world
  • Explore, support and cite scholarship on inequality and CSR, including feminist research;
  • Contribute to investigation of how masculinity dominates CSR research, discourse, organization and practice; and how inequality and neo-colonialism shape our field.
  • Bring the issue of rising inequality centre stage in business and society research of ALL kind

New voices on inequality and CSR

Our new book forms part of the growing literature which aims to bring new voices and perspectives to CSR. Contributions come from people in business, NGOs, as well as academia. Many chapters bring to the foreground the intersection of gender inequality with race and class inequality in global value chains and production networks. One of the strengths of these contributions is that they not only reflect feminist critiques, but also feminist engagement with CSR, including examples as to how we can do more to interrogate and improve CSR impacts with respect to equality. For example, Sofie Tornhill’s chapter provides a rare glimpse into on the ground experiences of the women ‘beneficiaries’ of corporate women’s empowerment programs. She ‘asks what do corporations do when they “empower” women?’, and finds much to be desired in the lived experiences of the women ‘entrepreneurs’ in a South African township enrolled on Coca-Cola’s 5by20 initiative.  The women in this research help us identify how we might better support gender and CSR program recipients in the future. Felicity Butler and Catherine Hoskyns report on a fair trade partnership between The Body Shop and a local sesame producer cooperative in Nicaragua that paid for care work done in the home to support the business, resulting in demonstrable benefits for women involved, and for gender equality, despite the wider institutional challenges. Elizabeth Prugl’s chapter explores how we might challenge the rise of neoliberal feminism via CSR, with its focus on individuals, and return our attention to the pressing questions of structural inequality. In line with a new focus on wellbeing inequality, as opposed to just economic inequality, other chapters extend the boundaries of CSR to interrogate Corporate Sexual Responsibility (relating to the use of strip clubs and pornography as part of business transactions, or on business travel), hegemonic masculinity, sexist culture in the gaming industry, reproductive technologies, and corporate philanthropy supporting work on violence against women. Issues of sexual harassment, such as that boasted about by Trump, perpetuate inequality and are key to a CSR agenda that extends to human rights.

Beyond the myth of “shared value”

To avoid wasting the crisis of Trump presidency as Dirk Matten suggests, we must move beyond our comfort zones and ‘business as usual’. Significantly more research is needed that specifically addresses the relationship between CSR and rising inequality in advanced economies, as well as globally. Focusing here has the potential to increase the relevance and usefulness of our field. In addition to challenging the role of private corporations in the governance of society, and the advance of privatization, we might focus more on: corporate taxation; investing much more in social infrastructure and the care economy, and fostering new forms of democracy in our own field, to name just a few. While, growing inequality is by no means the only cause of the current political backlash in the US and elsewhere, not for the first time in history, this comes with rising levels of explicit sexism, racism and xenophobia. If language is performative we are in danger of things getting worse for many people, and the myth of shared value, presented as a positive outcome for all, must be interrogated, contested and exposed more widely than Crane et al. (2014) suggest, because the data on inequality globally testify to the fact that the current system is not sharing value so much as it is extracting it. Moreover, this extraction is gendered (as well as racialised and classed) in important ways. The US election result reveals that we ignore this challenge at our peril.


Kate Grosser is a Senior Lecturer in the School of Management at RMIT University in Melbourne, and a Visiting Fellow in 2016 with the VELUX Chair in Corporate Sustainability, Copenhagen Business School. She researches gender and CSR, feminist organization theory, political CSR, feminist movements and CSR, culture and sustainability. She is on Twitter @KateGrosser and recently published a collection on Gender and Responsible Business: Expanding CSR Horizons (Editors: Kate Grosser, Lauren McCarthy and Maureen Kilgour, Greenleaf 2016).

pic by Greenleaf.

Let’s not waste the crisis of a Trump Presidency

By Dirk Matten

Last Tuesday’s election in the US has left the world in shock. As entertaining, astonishing, at times surely revolting, the Trump performance has been during the campaign – I do not know anybody that would have predicted him actually making it into the Oval Office. But that is history now.
I found myself always harboring rather ambiguous thoughts and sentiments regarding Trump’s ascent. But being surrounded by folks where even the slightest empathy with Trump made myself look like a total moron  – I learned to keep my feelings to myself, not at least in the hope I somehow got this wrong.

To begin with, I was not at all surprised to see Trump win the election. In some ways, this outcome is the logical conclusion of more than three decades of neoliberalism in the US. It did not help that his opponent had virtually nothing to offer to counter the very anxieties that carried Trump over every however unlikely hurdle during the campaign.

With all the shock and depression now seeping through the mainstream media there is one thing I really cherish and find extraordinary about this election: Trump won this election as an, albeit wealthy, outsider – against the united front of the media, the political class and the moneyed elites in the US and beyond. It helped that he is wealthy but that is not the main point. Even fairly balanced media outlets, such as the New York Times or the The New Yorker, over the last months just read as thinly disguised pro-Hilary propaganda; out of 55 main newspapers in the US, only one (1!) endorsed Trump. And yet he won the election. This should give other forces in many liberal democracies something to ponder. It is possible to beat ‘the system’, and in some way I am a little confused why this enormous victory of bottom-up democracy is not celebrated for what it is.

Trump is a symptom

Of course the main problem with Trump is Trump-the-person. He did all but help himself in giving fodder to the public to embark on an almost two-year project of character assassination. But again, I happen to have a different take on this. Did he tell a lot of lies? Of course. But then let’s not forget why Bush and Blair started the Iraq war. Lying is an integral part of US politics (and I am not even talking about his opponent’s husband when dealing with his White House romance). Trump said preposterous things about women. But in some way he just bragged about things that actually no one enacted more by the book then his opponent’s husband – covered up and tacitly supported by her for decades. Did he say racist things about Mexicans? Yes, but then let’s have a look at the 2.5m ‘aliens’ the Obama administration deported between 2009 and 2015. Did he say absurd things about Muslims? He sure did, but again, what he expressed is already social consensus in the US. Just think of the many people bumped off airplanes in the US recently just because they ‘looked’ or ‘spoke’ like Muslims (i.e. terrorists). Oh, and he has no experience in political office, right? Have we all forgotten that the same was said – on good grounds, at that – of his predecessor? Yes, he was talking about ‘bombing the sh** out of ISIS’. But wasn’t that exactly what his Nobel Peace price winning predecessor actually did for eight years by chaperoning a global drone war that killed almost 5,000 (incl. ca. 500 civilians)?

All I am saying then is that the media still tries to paint him as ‘unamerican’, as against the current political culture, as a pariah. The truth is, however, that he just unapologetically verbalised what is common practice all long. The United States – and I am talking about the political and economic system, as well as about half of the population – are an inherently racist, bigoted, violent and unfair country these days. As much as one may reject Trump as president – I think that his presidency just tells the true and accurate story about the moral morass the country has gotten into over the last three decades. It is ugly, but it is nonetheless not just attributable to one symbolic person.

Which leads to a big, often ignored or belittled core question. Trump did win the election because about half of the American electorate agrees with him. The real question we have to ask is what happened to the oldest democracy, a country that – 70 years ago – pacified Europe and gave the continent a new political setup based on enlightenment values. We just have to acknowledge that these United States are history now and that the country has been indeed on a steep decline in cherishing some of the core values which made it the world’s only superpower in the second half of the 20th century.

The America today is the America of ‘Dogville’, ‘Manderlay’ (as my Danish readers would appreciate) or ‘A History of Violence’, rather than ‘Independence Day’ or ‘Forrest Gump’. Trump’s majority is not just angry white men, as some want to make us believe. He represents a much wider fraction of American society as