Corporate social responsibility and societal governance

By Jeremy Moon

 3 min read ◦

Russia’s invasion of the Ukraine reminds us that corporate social responsibility (CSR) is both a reflection of the times we live in and also dynamic! Numerous corporations, acting in response to social and political pressure, are withdrawing from Russia on the grounds that human rights, and a nation’s rights, are being trampled on. This is not to say that these decisions necessarily come easily: there may be ethical, strategic, stakeholder and political tensions. But the point is that perhaps the most basic societal issue of war and peace – and its governance – enters CSR agendas. Ethical investors are even considering the defense industries as suitable for their assets.

In recent decades several challenges have emerged which appear to move CSR from a relative comfort zone of discretionary activities to more core societal governance challenges, some of these manifestly involve some corporate culpability (e.g. the 2008 financial crisis, international supply chain labor abuses, climate change, ecological degradation), others like international pandemics, war and international health and welfare challenges reflected in the UN Sustainable Development Goals, may reflect wider causes. Nonetheless, corporations claim some responsibility for these issues. Even corporate ‘talk’, as well as ‘walk’, contribute to the redefinition of CSR to take in core societal governance challenges.

This is understood as right and proper from some perspectives. Medieval corporations were established precisely to achieve public ends – often of basic infrastructure. Industrial corporations were pioneers of C19th health, welfare and education systems.  In many developing countries corporations take responsibility for physical security of their employees and communities. 

But in the late C20th a view took hold that this was somehow inappropriate.  Milton Friedman’s famous 1970 critique of CSR was precisely on the grounds that corporations are not accountable for addressing such issues: governments are. Many CSR advocates, whether fearing a corporate takeover of government or vice versa, and have advocated a dichotomy between the responsibilities (social and economic) of corporations and those of governments.

Yet the last twenty years have witnessed two related phenomena which challenge the dichotomous view. First, corporations have chosen to engage in social and environmental agendas which are core for national and international governments (e.g. human rights, corruption, access to resources), whether in response to pressure or by virtue of their own ethical or strategic judgement. Secondly, governments have encouraged corporations to enjoin public efforts, through their policies of endorsement and cajoling, financial incentives, partnerships and even mandates (e.g. for energy markets, non-financial reporting, supply chain due diligence).  

Governments have recognized the distinctive resources that corporations can bring to governance questions (e.g. to innovate, to experiment, to reach beyond national boundaries, to collaborate). Interestingly in cases of mandate, governments often cede to corporations discretion as to how, rather than whether, to comply. Thus, for example, corporations can choose whether to cynically comply with international weapons sanctions on a country to sell arms by the legal use of third parties to effectively maintain the sales OR to embrace the spirit and intention of the sanctions and uniformly cease the sales to the regime in question.

But Friedman’s critique nags and critics of corporations point to unaccountable corporate power through lobbying and informal influence.  Corporations lack a traditional democratic mandate. We elect MPs and governments, but not CEOs. So is engagement with public policy (rather than legal compliance) really the business of corporations?  

My short answer is ‘yes’ on the grounds that businesses are members of society and that corporations are afforded particular privileges by the state, and thus have clear public duties. But the situation is not satisfactory.  In most democratic jurisdictions corporations’ roles ‘to make’ and ‘to take’ regulation are not clearly specified and thus their accountability is unclear.  Moreover, new international multi-stakeholder initiatives which tie corporations in with each other and with civil society often fail to effectively regulate errant organizations.  

So we have a challenge which is about CSR and politics: how to better build corporations into political institutions? I suggest that the challenge is shared – for corporations to review their political participation to ensure that it is citizenly; for civil society to engage in defining how corporations can be more accountable and to engage more directly in corporate accountability (perhaps with support from government?); and for governments to review how accountably corporations influence and respond to regulation.  


About the Author

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

Photo credit: TarikVision on iStock

ESG investing in a changing regulatory environment: investing in active or passive ESG financial products?

By Marco Morazzoni and Dr. Kristjan Jespersen

◦ 8 min read 

The impending climate crisis emphasizes the need to mobilize large-scale investments to finance the transition towards a more sustainable and inclusive economy. The financial sector plays a pivotal role in this context, as it allocates capital from investors who wish to pursue financial and non-financial objectives to corporations and stakeholders who need these resources to empower the sustainability transition.

Over the past decades, individual investors have become aware of the risks inherent in unsustainable business practices, being increasingly interested in financial products that combine a competitive risk-adjusted return with Environmental, Social and Governance (ESG) criteria. Despite the increase in funds, indices and benchmarks that include ESG dimensions, the universe of ESG financial products remains difficult to navigate for individual investors due to the range of investment strategies that can be used to pursue ESG goals, such as negative and positive screening, best-in-class, ESG integration, impact investing and ESG engagement. In addition to ESG strategic considerations, investors ought to consider the level of active management inherent in their ESG products, since it has considerable implications for financial returns and the ESG objectives pursued.

In fact, while some financial products have an active investment approach, trying to beat a reference benchmark, others merely aim to replicate the ESG impact and financial performance of an index.

‘Active versus passive’ debate

The literature on conventional active and passive investing is almost unanimously in favour of long-term passive investing, due to active managers’ inability to consistently beat the market and to the lower fees charged by passive funds. However, the ‘active versus passive’ debate in the context of ESG investing is more nuanced.  This is because ESG investing entails the pursuit of intangible and hardly quantifiable goals that go beyond the achievement of mere financial returns. Furthermore, due to the different definitions and methodologies used in the assessment of ESG performance and the resulting unrealiablity of ESG data, the trade-off between impact and financial returns can be difficult to reconcile. 

A study conducted on 78 ESG active mutual funds and 15 ESG exchange-traded funds (ETFs) seeks to contribute to the debate by illuminating the financial and non-financial features that characterize these sustainable financial products. The funds were selected from Morningstar Direct according to specific criteria, such as: availability of an ESG rating, European domicile, invested in equity, active investment approach (for mutual funds) and passive investment approach (for ETFs).

By constructing an equally-weighted portfolio for the selected ESG active mutual funds and ESG ETFs, the study used the CAPM, three-factor, four-factor and five-factor model to compare the portfolios’ risk-adjusted perfromance before and after fees. To increase the robustness of the study, the regression analysis was conducted on various market benchmarks, such as MSCI World, STOXX Europe 600, MSCI World ESG Leaders and MSCI Europe ESG Leaders.  

The regression results indicated that the ESG active portfolio outperformed the ESG passive portfolio both before and after accounting for management fees. Controlling for the criteria used in the selection of the funds, the active outperformance could be attributed to the funds’ instrinsic characteristics, such as investment orientation, ESG investment approach and ESG scores. Accordingly, 77% of the ESG active portoflio had a global investment orientation compared to 27% of the ESG ETF portfolio. This entails that the active portolio covered more geographies, exhibiting higher diversification and improved risk-mitigation.

Further, 83% of the active portfolio practiced ESG engagment, a strategy that previous literature associates to superior financial returns and improved ESG impact.

By engaging with companies on ESG issues, ESG active funds may have been able to help ‘lagging’ firms improve their ESG performance, while enabling ‘leading’ firms to address their ESG issues. With respect to ESG scores (Morningstar and MSCI), the active portfolio displayed a lower overall ESG score compared to the ESG ETF portfolio. This finding could suggest that the active portfolio invested in lower rated companies on average, with the objective of helping them transform their ESG strategy and thus pursue higher risk-adjusted returns.

Insights to individual investors in ESG financial products

Recognizing the limitation derived from the small sample size and the fact that the active outperformance might be due to the specific funds selected, the findings were used to provide a set of insights to individual investors who wish to invest in ESG financial products.

Firstly, individual investors were categorised into ESG-unaware, ESG-aware and ESG-motivated, according to the investor labels used by Pedersen et al. (2021) “Responsible investing: The ESG-efficient frontier”. This categorization simplified reality to the extent that it became easier to derive actionable insights. Furthermore, it provided more granularity with respect to investors’ prerogatives regarding the trade-off between the pursuit of an ESG impact versus a risk-adjusted return.

Based on this categorization, investors who disregard ESG information (ESG-unaware) should invest passively in broad conventional ETFs or in a diversified portfolio of more specific conventional ETFs.

Investors who consider ESG information for risk-mitigation purposes (ESG-aware) ought to focus on the level of selectivity displayed by active managers in their stock-picking activity, measured in terms of high/low R-squared. If active managers are highly selective (low R-squared), ESG-aware investors may consider foregoing part of their return, due to the higher active management fees, and thus benefit from managers’ ability to pursue a greater ESG impact and potentially higher risk-adjusted returns.

Conversely, if active managers exhibit low selectivity with respect to a reference benchmark (high R-squared), investors would be better off investing passively in broad ESG ETFs or in a diversified portfolio of more specific ESG ETFs. Lastly, ESG-motivated investors may be better off investing in ESG active funds who practice ESG engagement, as the higher fees charged by these funds would worthwhile, given the superior ESG impact inherent in ESG engagment strategies.

Regulatory considerations

In addition to the empirical findings, the study also included regulatory considerations in the assessment of the suitability of active versus passive ESG financial products for individual investors. This was critical, since the new MiFID for sustainability preferences will come into force on the 2nd of August 2022.

According to this regulation (2021/1253), investment firms will be obliged to ask their clients about their sustainability preferences and find out whether they are interested in sustainable financial products. If the answer is affirmative, financial advisors will only be allowed to offer MiFID-aligned products to their clients. A MiFID-aligned product will have to include a minimum portion of ‘environmentally sustainable Investments’ (SFDR article 9), EU Taxonomy-aligned investments, or enhanced article 8 investments, consisting of article 8 investments (SFDR article 8) which also include Principal Adverse Impact (PAI) indicators.

Linking the new regulatory requirements to the findings of this empirical research, it is reasonable to expect that ESG-unaware investors will no longer exist, as investment firms will be legally required to inform these clients about the ESG implications inherent in their investments. This will give rise to an increase in supply of sustainable financial products (MiFID-aligned), as investment firms strive to keep up with the increased demand for these products. The rise in supply will most likely be larger than the increase in demand, since a portion of the new ESG-aware investors might continue disregarding ESG information, if ESG financial products are priced unreasonably (excessively high management fees). This will ultimately lead to higher competition among investment firms, with a consequent downward pressure on fees in the long-run. Lower investment costs could subvert individual investors’ incentives, as they decide on whether to invest in ESG active or passive funds. Accordingly, it might become desirable for ESG-aware investors to invest in ESG active funds who practice ESG engagement, as opposed to it being a strategy exclusively suitable for ESG-motivated investors.


The information contained in this blog post is not to be taken as constituting the giving of investment advice or recommendation. The reader is acting for its own account, and they will make their own independent decisions as to whether any investment is appropriate based upon their own judgment.


About the Author

Marco Morazzoni is a recent graduate in MSc Applied Economics and Finance from Copenhagen Business School. Having an interest in finance and ESG, he wrote his master’s thesis on “ESG exchange-traded funds versus ESG active funds: how can individual investors pursue ESG objectives while achieving competitive risk-adjusted returns?”

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: Khanchit Khirisutchalual 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.


Photo by Freddie Collins on Unsplash

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”.


Photo by Tania Malréchauffé on Unsplash

“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.

Nudging for a Better Workplace: How to Gently Guide Employees Towards Ethical Behaviour

By Leonie Decrinis

 2 min read ◦

Corporate scandals caused by unethical behaviour can have dramatic consequences for a company’s bottom line. The Volkswagen emission scandal created a financial damage of over 45 billion US dollars thus far. The Enron accounting scandal ended in the company’s bankruptcy back in 2001. Most recently, the #MeToo movement has brought to light sexual harassment at the Weinstein Company, Fox News and Uber, to name just a few, all subject to payments of significant fines. How can we explain such scandals and what can companies do about it? 

Why good people do bad things 

In general, when we think of bad behaviour we think of it as a matter of bad character: bad people do bad things. But research tells us that this is view is misguided. Normally, employees involved in unethical behaviour have high moral values and good intentions, in line with their companies’ sets of ethical standards. Yet, their behaviour can deviate significantly from personal and organisational principles.

In fact, the moment they engage in unethical behaviour, they might not even realise that they are doing the wrong thing. 

Context matters in explaining such ‘ethical blindness’. Environmental cues in the workplace, like monetary signals, trigger the adoption of a business decision frame, whereby people favour self-interested choices over ethical behaviour without necessarily being aware of it. By applying mechanisms of moral disengagement, they think that they are doing the right thing, while in fact acting unethically. For example, they may justify their detrimental conduct by portraying it as serving a socially worthy purpose, which makes them temporarily blind to the harm they are causing.

Building a culture of control does not solve the problem

In response to issues of moral misconduct, companies usually tighten their internal control systems. They strengthen the requirements for ethics trainings by making them mandatory and introduce monitoring and surveillance systems. They also try to incentivise ethical conduct through rewards and punishments. However, these instruments do not always lead to the intended behavioural outcomes and instead might even aggravate wrongdoing. This is because such instruments send signals that reinforce the adoption of a business decision frame, which is prone to moral disengagement. For example, in the case of Volkswagen, a CEO who led through fear and bound high expectations for engineer development to tempting bonus payments encouraged employees to circumvent the rules by engaging in emissions cheating. 

Nudging – beyond carrots and sticks

To promote ethics in the workplace, building a culture of fairness and trust is pivotal. Nudges are instruments that align with these principles. They do not mandate or forbid choices nor do they meaningfully alter the financial incentives related to various behaviours. Instead, by considering the psychology of decision-making, they try to gently guide people towards certain outcomes while preserving their freedom of choice. Nudges do so by subtly altering the context (choice architecture) in which humans make their decisions. Examples include default settings or social norm feedback as well as the simplification of information or the framing and priming of messages.

While initially mostly applied by governments to steer the behaviour of private citizens or consumers, more and more companies are relying on nudges to improve the choices of their employees.

JP Morgan, for example, uses proprietary algorithms to predict unethical trading behaviour before it occurs. Traders then receive pop-up messages prompting them to reconsider transactions when they are at risk of breaking the rules. Scientific studies further support the power of nudges in form of photos of close others or moral symbols at the workplace that encourage employees to adopt an ethical decision frame, which helps them to act in line with moral values. Overall, while much remains to be explored when it comes to ethical workplace nudging, the gentle steering tool seems to provide a promising route for improving behavioural ethics outcomes in organisations. 


Further Readings

Desai, S. D., & Kouchaki, M. (2017). Moral symbols: A necklace of garlic against unethical requestsAcademy of Management Journal.

Hardin, A. E., Bauman, C. W., & Mayer, D. M. (2020). Show me the … family: How photos of meaningful relationships reduce unethical behavior at workOrganizational Behavior and Human Decision Processes.

Palazzo, G., Krings, F., & Hoffrage, U. (2012). Ethical blindnessJournal of Business Ethics.


About the Author

Leonie Decrinis is PhD fellow at Copenhagen Business School with research interests in corporate social responsibility, sustainability governance and behavioral sciences. Her PhD project focuses on applying behavioral insights to corporate sustainability in order to align governance objectives with organizational behavior.


Photo by Shridhar Gupta 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

Unaccounted Risk: The Case of Sulfur Hexafluoride (SF6) in Offshore Wind Energy

By Esben Holst & Dr. Kristjan Jespersen

◦ 5 min read 

Carbon accounting provides a science-based measurement of greenhouse gas (GHG) emissions, achieving greater accountability of companies’ emissions causing global warming. GHGs are reported in CO2 equivalents (CO2e), meaning GHGs with widely different chemical qualities and environmental impact can be presented in a single understandable metric. However, the underlying methodology is debatable. This article questions whether the CO2e of Sulfur Hexafluoride (SF6) is misreported.

What is SF6 and why is it a hurdle for a green energy transition?

SF6 is used as an insulator in a wide variety of electrical equipment, mainly to prevent fires in incidents of short circuits. It is found in transformers inside windmills, offshore and onshore substations, and in power cables.


(Illustration to the left shows a sideview of a windmill turbine – Source: CAT-Engines. Right: an offshore wind energy system – Source: Nordsee One GmbH)


SF6 is a synthetic man-made GHG and cannot be reabsorbed naturally like CO2, meaning once emitted, it does irreversible damage. Most GHGs remain in the atmosphere around 100 years – SF6 remains for 3,200 years. These numbers are given by the Greenhouse Gas Protocol (GGP) based on calculations by the Intergovernmental Panel on Climate Change (IPCC). 

The IPCC’s metric Global Warming Potential (GWP), reveals environmental harm of a given GHG in CO2e. What then, makes SF6 problematic when converted into CO2e? SF6 has a GWP 23,500 times higher than CO2 – a value that is difficult to comprehend. The GWP metric is calculated using a 100-year timeframe based on GHG’s environmental harm. Yet, SF6 has an atmospheric lifetime of 3,200 years, essentially leaving 3,100 years of environmental harm unaccounted for. Using a simple logarithmic function incorporating IPCC data accounting for the missing 3,100 years, the GWP almost doubles. As illustrated below, this indicates how SF6 may be misrepresented in terms of environmental harm in CO2e emissions reporting.



As found by AGAGE – MIT & NASA, other worrying trends are observed. The atmospheric concentration of SF6 has more than doubled in the past 20 years. Luckily, its current concentration in the atmosphere remains low relative to other GHGs such as Methane or Nitrous Oxide.


Source: AGAGE


Regardless, the GWP of these two GHGs pales in comparison to the mindboggling detrimental effect of SF6 on the environment. Emitting this gas should therefore be strictly regulated.

Greenhouse Gas Emissions Reporting – Diverging Approaches

It only takes a little digging into offshore wind energy players to uncover diverging conversion methods of SF6 into CO2 equivalents (CO2e). The GHG emissions reporting methodologies of industry leaders use different emissions factors to convert SF6 into CO2e. An example of underreporting is illustrated by Vattenfall in their 2019 sustainability report, reporting SF6 as 15,000 times more potent than CO2. The emissions factor given by the GGP is 23,500. Ørsted uses a GGP emissions factor for the same gas in their 2019 ESG report. Yet, while Energinet also states it uses the GGP reporting framework in their 2020 CSR report, it uses an emissions factor of 22,800. The ownership distribution between Vattenfall and Ørsted in the Danish wind farm Horns Rev 1 of 40% and 60% respectively, thus blurs accountability and severity of reported emissions. As highlighted by the BBC, atmospheric concentration of SF6 is ten times the reported amount by countries. The IPCC and GGP are also aware of this.

During the past decade…actual SF6 emissions from developed countries are at least twice the reported values. (Fifth Assessment Report of the IPPC)

Measuring Impact of SF6 Leaks by Offshore Wind Players

SF6 emissions will rise exponentially alongside expanding electrified energy infrastructure using equipment containing this gas. This, together with repeated SF6 leaks, perpetuates the worryingly steep upward trend in atmospheric content of SF6 shown above. In 2020, Energinet reported a leak of 763.84kg SF6, or 17,950,240kg CO2e. The environmental impact of this leak is about the same as the emissions of 53 SpaceX rocket launches. Energinet has since admitted to years of underreporting of SF6, leading to amended SF6 emissions related to normal operations doubling.

Leaks of SF6 are too common. In Ørsted’s 2020 ESG report, a major leak at Asnæs Power Station was mentioned without disclosing the actual amount – withholding important risk-related data from investors. However, Energinet disclosed an SF6 leak of 527kg at that same facility in their 2020 CSR report. The leak for which Ørsted is responsible, yet feels is not material to disclose, is therefore potentially around 12,384,500kg CO2e. Indicating light at the end of the tunnel, Vestas has included SF6 on their Restricted Materials list since 2017, as well as introducing a take-back scheme for infrastructure containing this gas – setting a better example for business models of our green energy transition leaders.

Strengthening the Global Response to Climate Change Risk

It is vital that we understand SF6 is so detrimental to fighting climate change beyond 2100 that it has no place in sustainable business models today. Even if CO2 emissions are reduced in alignment with 2100 Paris Agreement goals, reporting in a 100-year timeframe will not save a planet billions of years old. GHG reporting must be better regulated and scrutinised in order to deliver a truly green energy transition. Releasing a gas causing irreversible damage cannot be an acceptable trade-off for a short-term “green” transition. While most company reports claim no alternatives exist, this is not true. Therefore, SF6-free equipment must be mandatorily installed.

A green transition goes beyond 2100, yet poor regulation enables energy companies to present SF6-CO2e favourably by using lower emission factors. Offshore wind energy players have not provided comparable, accountable, and transparent reporting – indicating stricter regulations on GHG reporting are necessary.

The Way Forward: Better Regulation

In 2014, an EU regulation banned the use of SF6 in all applications except energy after lobbyists argued no alternatives exist. The EU acknowledges the environmental harm of SF6, yet EU action has been described as inadequate. Asset managers, institutional and retail investors are exposed to hidden environmental risks related to SF6 in terms of double materiality. Double materiality referring to the financial costs related to management of SF6 incurred once completely banned. Non-financial reporting of GHG emissions and CO2e needs to be regulated far more than current global regulations. Investors, society, and most of all our environment deserves better protection.


NOTE: This article is based on a Copenhagen Business School (CBS) research paper in the course ‘ESG, Sustainable & Impact Investment’ taught by Kristjan Jespersen – Associate Professor at CBS – as part of the newly introduced Minor in ESG. The paper questions the greenness of wind energy by using the case of three large offshore wind energy farms in Denmark: Horns Rev 1 & 2 and Kriegers Flak. The findings are based on ESG, sustainability & annual reports from 2015-2019 of all involved OEMs, manufacturers, operators, and energy grid providers. Implications of the findings point to a coming hurdle within the electrification of a global green energy infrastructure transition. 


About the Authors

Esben Holst, an SDG and CSR research intern at Sustainify, is a Danish-Luxembourgish masters student at Copenhagen Business School. Besides attending the newly introduced Minor in ESG at CBS, his past studies focus on international business in Asia and business development studies.

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


Photo by Karyatid on Unsplash

SFDR, NFRD and the EU Taxonomy – What is their relationship?

By Andreas Rasche

◦ 5 min read 

The new Sustainable Finance Disclosure Regulation (SFDR) is on the minds of many investors these days. While a lot has been written on SFDR itself, I discuss how it relates to the Non-Financial Reporting Directive (NFRD) and the EU Taxonomy on sustainable economic activities. Taken together, these regulations can be overwhelming and maybe even confusing. While this is not the right place to comprehensively discuss all three regulations, I make some clarifications on their interlinked nature. 

SFDR, NFRD, and the EU Taxonomy – What are we Talking About? 

To start with, let us briefly review the three legal instruments, all of which belong to a series of EU regulations under the EU Action Plan on Sustainable Finance.

  • NFRD is the EU legal framework for regulating the disclosure of non-financial information by corporations. It was adopted in 2014 and states that corporations have to report on ESG information from 2018 onwards (for the 2017 financial year). NFRD is rather flexible – it applies only to so-called “public interest entities” (basically rather big corporations) and it contains so-called comply-or-explain clauses (allowing for non-disclosure of information if this is made transparent and reasons are given). 
  • SFDR is the new EU regulation that introduces rules for financial market participants (FMPs) and financial advisers (FAs) to report on how they account for sustainability risks. SFDR applies at the “entity level” (i.e. requiring financial firms to report on how the whole organization deals with such risks) and also on the “product level” (i.e. requiring firms to report on how their financial products are affected by such risks). SFDR contains few comply-or-explain clauses (e.g., smaller firms, with less than 500 employees, can opt out of reporting on due diligence processes). The regulation asks all FMPs and FAs to report on sustainability risks even if they do not offer ESG-related products. If an entity offers ESG-related products, SFDR requires additional disclosures depending on how “green” the product is considered to be. SFDR came into force on 10 March 2021. 
  • The EU Taxonomy regulation (hereafter: the Taxonomy), which entered into force 12 July 2020, reflects a common European classification system for environmentally sustainable activities. Basically, the Taxonomy tried to answer the question: What can be considered an environmentally sustainable activity? Answering this question is essential for investors to prevent “greenwashing” – i.e. a situation in which financial products are marketed as being sustainable without meeting sustainability criteria. The taxonomy defines six environmental objectives, and it defines an economic activity as sustainable if this activity contributes at least two one of these objectives without, at the same time, doing significant harm to any of the other objectives. 
Differences and Commonalities 

To start with, it is important to note the different legal status of SFDR/the Taxonomy as well as NFRD. NFRD is based on an older EU Directive (2014/95/EU). Directives imply that EU member states have to translate the broad requirements into national regulation. By contrast, SFDR (2019/2088) and the Taxonomy (2020/852) are both based on European regulation, which is immediately enforceable and does not require transposition into national law. 

To understand how the three legal frameworks relate to each other, look at the Figure below. NFRD applies to corporations of all kinds. Hence, for investors NFRD is mostly relevant because it stipulates how investee companies report ESG data. SFDR, by contrast, most concerns financial market actors and ensures transparency about how these report on sustainability risks to their audiences (e.g., retail investors). The Taxonomy was introduced to have a common reference point when trying to figure out whether an economic activity really is sustainable. The Taxonomy therefore has the power to further specify the regulations set out in SFDR and NFRD. 

source: Andreas Rasche
Emerging Relationships  

The linkages between the three frameworks will be further specified throughout the coming years. While SFDR has been in force since 10 March 2021, it is only in the so-called “level 1 stage of development”. As with many EU regulations, level 1 development sets out the basic framework principles for a regulation, however without specifying technical details. SFDR level 2 will come into force once the regulation is complemented with Regulatory Technical Standards (RTS), which are developed right now. The RTS will also specify the linkages to the Taxonomy in more detail (e.g., related to the “do-no-significant-harm” concept inherent in SFDR). 

So, what can we say right now? The current versions of SFDR and NFRD do not yet link disclosures to the Taxonomy. This is likely to change, especially with the SFDR RTS being further specified and rolled out (in early February the European Supervisory Authorities released their final draft of the SFDR RTS). Moreover, the NFRD regulation is currently under consultation and will be revised in the near future. However, two important linkages are important to consider right now.  

  • First, the scope of the Taxonomy is defined through NFRD and SFDR. In other words, if an organization is affected by NFRD and/or SFDR, the Taxonomy will also be relevant for its disclosure practices. It is important to note here that the EU Taxonomy defines further mandatory disclosures in addition to what is laid out by NFRD and SFDR. 
  • Second, the Taxonomy asks companies (incl. asset managers) to report the percentage of their turnover and capital as well as operational expenditures that are aligned with the Taxonomy. It also asks asset managers to report the percentage of their portfolio which is invested in economic activities that are aligned with the Taxonomy. 
The Future

We will witness a good deal of technical specifications of all three regulations throughout the next years. SFDR level 2 reporting will kick in once the RTS standards are part of the reporting (probably by mid-2023); also by 2024 year-on-year comparisons of data points under SFDR will be likely mandatory. The six environmental objectives of the Taxonomy will be specified through technical screening criteria, some of which will be released very soon. 

It is good to see non-financial reporting and sustainable finance being backed by strong European regulations. It allows for more comparison and benchmarking and hence transparency. But, of course, we should also be prepared for a good deal of clarifications that will be necessary until institutionalized reporting cycles can fully kick in and unfold their potential. 


About the Author

Andreas Rasche is Professor of Business in Society at the Copenhagen Business School (CBS) Centre for Sustainability. His latest book “Sustainable Investing: A Path to a New Horizon” (with Georg Kell and Herman Bril) was published recently. Email: ar.msc@cbs.dk Homepage: www.arasche.com

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

Sustainable livelihoods? The informal sector beyond Covid-19

By Søren Jeppesen

As a number of the CBS Sustainability blogs have mentioned since March 2020, the official reactions to Covid-19 have (so far) not been doing much for sustainable development (apart from lower CO2 emissions from air travel). Despite concerned voices criticizing the limited attention to combating climate change (‘environmental sustainability’) in the longer run, little impact on policy makers has been registered.

If we focus on ‘social sustainability’ the picture is similar. Discussing the social side of sustainability is part and parcel of assessing the situation in the informal sector and among the estimated two billion people reliant on their livelihoods through the informal activities across the Globe. Sadly, the situation has shown that this group of people and their families have suffered from the imposed restrictions due to Covid-19 (see here).

While the negative impact on income and livelihoods probably is the most severe consequence of inability, lack of willingness (and in some cases maybe even sheer ignorance) among authorities, the events since March can also be viewed ‘an opportunity missed’ regarding (more) sustainable practices.

The classical example is waste handling where informal workers (or scavengers) are involved in waste collection, sorting and identifying material for recycling and reuse. The Indian system where almost all component of waste are sorted and reused is well-known. But additional examples are found in areas like minimizing food waste and establishing social safety nets (Tucker and Anantharaman, 2020). Had governments appreciated the role of the informal sector and the activities undertaken, the period since March could have been used to change towards a ‘sustainability footprint’.

So, instead of using the (unfortunate) challenge to aim for positive change why have governments then been so keen to do the opposite and merely lockdown the informal sector (including denying poor people of their meagre livelihoods)? As Tucker and Anantharaman (2020) argue, it might be due to informal work being perceived as a ‘deficit’ (lack of contracts, lack of permits, lack of tax payment, lack of this and lack of that). International organisations like ILO have long been arguing in favor of ‘formalization of the informal’ (ILO, 2019). And not to romantize the informal sector, nevertheless it is intriguing that this is and has not been a sector perceived as ‘creative, agile, flexible’ and all the buzz that the present glorification of the private sector and individual initiative otherwise has been marked by.

Now, we can’t change what have been the typical type of reactions to the Covid-19 situation across the globe, but we do note that we have increasing social challenges ahead due to rising poverty levels, the naïve, optimistic wish for the New Year is that attention will be placed on how to engage the informal sector and all its resources in the strive for a more sustainable development path. It will not only open up the Pandora’s box regarding new and valuable ways on dealing with the Global trajectories, but could provide avenues for the informal sector to be reckoned as ‘a contributor’ (instead of ‘a deficit’).


References:

CGAP, 2020. Covid-19 Briefing. Insights for Inclusive Finance. Relief for Informal Workers: Falling through the Cracks in the COVID-19 Crisis. August.

ILO . International Labour Organization; 2019. Work for a Brighter Future. Geneva.

Tucker, J.L. and Anantharaman, M. 2020, Informal Work and Sustainable Cities: From Formalization to Reparation, One Earth. 2020 Sep 18; 3(3): 290–299. (doi: 10.1016/j.oneear.2020.08.012)


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).


Photo by The Ian on Unsplash

Normative foundations for stakeholder involvement in environmental and societal impact assessments

A complex issue of global relevance

By Karin Buhmann

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

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

Public requirements on consultations and corporate management of risk to society

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

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

Recommendations on ’meaningful stakeholder engagement’ in societal impact assessments

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

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

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

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

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

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

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

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

Mandatory requirements

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

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

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

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

Common demands on a good consultation process

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

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

The Aarhus Convention establishes that:

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

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

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

Consultations aim to create dialogue, not conflict

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

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

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


References

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

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

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

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

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


About the Author

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


Photo by Clay Banks on Unsplash

Different pathways to sustainability standard adoption

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

By Hattaya Rungruengsaowapak, Caleb Gallemore & Kristjan Jespersen

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

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

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

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

Phase 1 – Testing the waters (2004 – 2011)

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

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

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

Phase 2 – Setting the groundwork (2012 – 2016)

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

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

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

Phase 3 – Takeoff (2017 – 2020)

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

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

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

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

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

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

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

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


References

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

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

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


About the authors

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

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

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


Photo by Nazarizal Mohammad on Unsplash

What does it mean to call someone a stakeholder?

By Matthew Archer

The word “stakeholder” is ubiquitous in sustainability discourse. We see it in corporate sustainability reports, policy documents, business plans, and sustainable development guidelines. Stakeholders are discussed in parliaments, in corporate boardrooms, at sustainability conferences, and in classrooms around the world.

The stakeholder concept was popularized with the 1984 publication of R. Edward Freeman’s Strategic Management: A Stakeholder Approach, where the stakeholder was defined as a person or group who are able to affect or are affected by an organization pursuing its goals. Although the term has been hotly debated ever since, it is clear that Freeman’s work has had a huge impact on management discourse, especially when it comes to social responsibility and sustainability.

In my own ethnographic research over the past few years among people I refer to as “sustainability professionals,” I’ve heard the word stakeholder mentioned countless times, in nearly every context, from venues like the COP21 negotiations in Paris to casual conversations with friends and colleagues at the pub.

Students in my classes use it fluently to refer to groups as distinct as shareholders, consumers, and factory workers. They’re able to classify these different stakeholders according to how important they are from the perspective of the company. Sometimes, the stakeholder concept can seem too expansive, with students questioning whether anyone is not a stakeholder.

But in my own research, I’ve found that although it is pretty widely accepted that most people are stakeholders in one form or another, there is a particular imaginary surrounding stakeholders. In a recent article, I found evidence for this by looking at the images that accompany mentions of the word stakeholder in sustainability reports and standards guidelines.

More often than not, these images depict workers in the Global South who are almost always people of color, and who are often women.

Similarly, when people use the word “stakeholder” in interviews, they are typically referring to people in producer countries, with the implication that these distant, marginalized stakeholders are the ones who stand to benefit the most from sustainability projects and, crucially, stand to lose the most if those projects are unsuccessful.

This led me to question the power dynamics that are inherent in the stakeholder concept. There’s a big literature in geography and anthropology on the power to categorize groups of people, drawing on decades of critical research on international development. More to the point, when companies talking about engaging with stakeholders in their corporate sustainability and corporate social responsibility initiatives, most of the time they’re actually treating the people we think of as stereotypical stakeholders as stakes, that is, what stands to be lost in a game of chance.

Given the power differences between people who can affect an organization and people who are affected by it, perhaps it’s time to come up with an alternative to the stakeholder concept.


About the author

Matthew Archer is Assistant Professor at Copenhagen Business School. He is an ethnographer and political ecologist interested in corporate sustainability and sustainable finance. Visit Matthew’s personal webpage.

By the same author:  Teaching (and doing) anthropology in a business school


Photo by Antonio Janeski on Unsplash

Tax havens, COVID-19 and sustainability

By Sara Jespersen

At CBS we will host a workshop and two public events (see below for sign up) on corporate tax and inequality next week 24th – 26th June 2020 – the COVID-19 crisis has underlined the pertinence of this topic in major ways.

Taxation, tax havens and corporate tax have been high on the agenda for a while. Since the outbreak of the global financial crisis of 2008 corporations seeking to minimize their tax payments have been under close watch from the media, civil society and politicians with a focus on ensuring that corporations pay their “fair share”. The OECD and the EU have gone to quite some length to try to stop tax-optimizing behavior through revising and modernizing existing rules and legislation. In collaboration with the IMF and the World Bank they have invested time and resources in strengthening tax systems, governance and improving domestic resource mobilization in low- and middle- income countries. This work is ongoing and corporate taxation is already high on the list of priorities for the world community. But then along came COVID-19.

Taxation is central in two ways when we reflect on the pandemic and what will follow. Firstly, governments have passed historic economic recovery packages to ensure that the private sector stays afloat and to avoid mass lay-offs during the lockdown period in 2020. The question is what can we expect in return? Secondly, the emerging discussion on the disruption caused to national economies should be thought into long-term solutions for sustainability including tax.

“Tax haven free” recovery packages

Poland and Denmark, followed by Italy, Belgium and France have attached an explicit conditionality to their COVID-19 state support that companies cannot be registered in tax havens.

In light of this clear conditionality, there has been a media storm in Denmark, when a journalistic investigation revealed that several companies that government support had an ownership structure that was associated with tax havens and with a consumer outcry on social media. This prompted one of the companies, a well-known bakery “Lagkagehuset”, to take out full-page advertisements in daily newspapers to counter the criticism and explain the company structure. The CEO also did a lengthy interview on the issue of the company’s ownership structure to a major daily newspaper. 

Two immediate takeaways can be drawn from this:

  1. It has revived the discussion about the usefulness of tax haven blacklists (see more on this by CBS professor Leonard Seabrooke in Danish).  Which countries should be on them, and what does it mean if you as a business (or individual) are associated with a tax-haven on such a list? One thing is clear, measures to push countries into greater cooperation will not in itself comprise a substitute for measures to make companies act responsibly.
  2. It has emphasized the importance of corporate governance including a reflected approach to responsible corporate tax practice. The fact that there are so-called tax havens out there warrants companies and individuals to decide how or if they want to be associated with these. If yes, companies must accept that they may be liable to critique and journalistic and even political inquiry into what that association means. It should come as no surprise that association with these jurisdictions may entail suspicion.

Tax havens are not the only concern in relation to companies’ environmental, social and governance (ESG) behavior in this pandemic. The financial times reported how NGOs and investors are challenging shareholder primacy as it leads to growing inequality. Corporate governance and ESG, including tax, is now more than ever one to watch for companies that wish to be part of a sustainable business community in the short-term and the long-term.

Opportunities in the long term

Recovery packages are short-term measures. However, in the long term,  the pandemic offers an opportunity that must not be missed in terms of taking a serious look at which direction our global society is heading.

While the pandemic, in theory, cannot tell the difference between the poor and the rich, it is clear that the existing inequality in our society is all made acutely visible during COVID-19. In the US more than 40 million have lost their jobs during the pandemic.  In Sierra Leone, there is allegedly just 1 available ventilator in the entire country (for a population of 7 million, where Denmark has more than 1000 ventilators for a population of 5.8 million).  As for the gendered impacts even for the better off, there are indications that women are less able to find time to prioritize research and publishing during the crisis than men are (). While big tech companies look to come out of this crisis more profitable and, possibly, powerful than ever.

These are just examples of how inequality is front and center in this crisis and how it offers an important opportunity to consider if the direction we are heading in is where we want to go.

With many countries having been in a complete]  lockdown and economic activity at a standstill, this presents a unique opportunity to truly rethink how well the existing economy has worked for our societies and planet. The city of Amsterdam in the Netherlands has seized the opportunity to embrace the concept of the doughnut economy and the OECD is arguing that it makes discussions about challenges of digitalization of the economy and a minimum level of tax for MNEs more pertinent.

Tax is the central tool for governments to raise revenue and engage in redistribution. However, it is much more than a technical tool in an administrative toolbox.

It is the modern social contract for individuals and businesses as highlighted by the discipline of fiscal sociology. Short term, long term, whichever way, you approach it tax should, and will, play a central role in the debate about where we want to go from here towards a more sustainable, and more equal, future.

It provides a key source of revenue to finance vital public services, it can act as an explicit redistributive tool central to fighting inequality, and if used wisely, it can incentivize the behavior of corporations and individuals including the transition to more sustainable practices. Some of these things will be discussed at CBS in June.

A timely workshop on corporate tax and inequality

At CBS we are hosting a timely interdisciplinary workshop as a collaboration between the department for Management, Society and Communication, CBS center for sustainability, and the Inequality platform on corporate tax and inequality. We are bringing together researchers from around the world to meet (virtually) and discuss different pieces of research emerging on this relationship. We have legal analysis, economic modelling, qualitative analysis of tax administration efforts, and sociological analysis of tax professionals and wider societal tendencies on the agenda.

Our keynote speaker Professor Reuven Avi-Yonah will give a (virtual) public lecture (SIGN UP HERE) on Thursday 25th of June 2020 at 14:15 CET. He will speak to the short, medium and long term revenue options in light of the pandemic including a chance for a Q & A. He is a renowned scholar and has published widely on international tax, history of the corporate form, and CSR and tax among other topics.

 The workshop concludes on June 26th 2020 with a (virtual) practitioner panel to discuss knowledge gaps (SIGN UP HERE) from the perspective of professionals of various disciplines. Bringing together professionals from media, NGOs, tax advisory services, tax administration and business. This is likely to be a lively debate with the aim of furthering the CBS tradition of engaging the private sector on what could be fruitful avenues for further research in this axis of relevance between tax and inequality.


About the author

Sara Jespersen is a PhD Fellow at Copenhagen Business School. Her research is on the emerging relationship between responsible business conduct and corporate tax planning of multinational enterprises. In a complex governance context, there are now signs of corporations’ self-regulation and the emergence of voluntary standards. Sara is interested in what this means for our understanding of corporations as political actors and the notion of political CSR.


Image by pickpik

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

The rise of social media bots – how do they work, and how can you spot them?

By Daniel Lundgaard

Bots and their impact on online conversations is rapidly becoming an important problem on social media. If we look at the conversation around the current Coronavirus pandemic, somewhere between 45% to 60% of the accounts on Twitter that promoted disinformation were identified as bots, in the anti-vaccine debate researchers have found that bots are used to “weaponize” online health communication and create discord, and in the climate change debate research suggests that about a quarter of all tweets are produced by bots.

These bots are used in a wide range of misinformation “strategies”. Based on findings from my own research and a review of current research on the topic, I have summarized what I perceive as the three main “strategies” where we know that bots have been used:

Amplifying certain opinions. The simplest strategy where bots have been used is in efforts to amplify a specific opinion, often by continuously re-tweeting the same tweet or link, or by only endorsing the shared posts of people with similar interests.

Flooding the discourse. Malicious actors often seek to increase confusion and challenge the current status quo e.g. the scientific consensus that climate change is man-made. In this strategy, bots are used to spread large volumes of information and start multiple conversations (often covering both sides of the debate), which makes it easier to question the current consensus. A similar tactic is as often seen in disinformation campaigns where large amounts of “fake news”-outlets create a new media ecosystem, and because of the increased volume of information, the voice of the validated outlets is “drowned”, which empowers the fake news outlets.

Linking issues to current tensions. Efforts to link debates to current tensions seek to polarize opinions and cause divide as seen within the vaccine debate where a debate was associated with current racial/ethnic divisions. Here bots are mainly used to either explicitly make the connection in their own tweets, or by commenting on content shared by others, suggesting the presence of a link to certain socioeconomic tensions.

With these strategies in mind identifying the users that in reality are bots seems like a crucial task. However, detecting and adequately handling these bots has proven to be a challenge for the major social networking sites such as Facebook and Twitter.

Nonetheless, after reviewing current tools made available for bot detection, current research on the topic and my own findings from an analysis of roughly 5 million tweets about climate change, I have identified a few tips that might help you to spot these bots – and potentially their impact on the conversation. For this list, I have left out bot-detection approaches that are based on reviewing patterns not normally visible to most users e.g. network features detection if the same group of users follow and re-tweet/like another group of users with similar language and message.

The user profile

Reviewing the user profile appears as one of the best ways for “normal” users to detect a bot. The most simple indicators could be a missing profile picture, however sophisticated bots might use stolen photos and here a quick “reverse image search” (right-clicking on the profile image and “search google for image”) might reveal something about the source of the image e.g. that it is taken from someone else. A generic (or poorly worded) profile description might also be an indicator, and in my own research I have found that reviewing the content of user profile descriptions is even better than reviewing the content of the tweets shared on a specific topic for predicting opinions.

Different or “stiff” language

The conversation on Twitter is often informal and people often use abbreviations or structure their sentences differently, which can be difficult to copy. As a result, bots might appear mechanical or rigid in its language – often returning to the same topic, share the same link over and over again, or returning to a topic that should have outlived the rather short life-cycle of some topics on Twitter.

Lack of humor

Granted, everyone misunderstands a joke sometimes and people can have trouble with understanding sarcasm. Because of this, understanding humor, especially sarcasm, also remains one of the major challenges for bots to both understand but also respond accordingly. This is particularly relevant on Twitter, where conversations may refer to shared understandings, inside jokes or memes used in a certain way within a community, which even sophisticated bots may have trouble understanding and adapting to.

Temporal behavior

Reviewing past activity, in particular with focus on patterns in temporal behavior might also be useful e.g. by spotting that a user seems to tweet at the same hour every day if it shares multiple tweets pr. Minute, or if the user immediately retweets or comments on other posts, which can be an indicator of an automated and pre-defined response.

It is important to acknowledge that not all bots are seeking to manipulate political conversations on social media. However, while some bots definitely are created for noble purposes, bots are increasingly becoming an important tool for various (potentially malicious) actors and their efforts to shape conversations on social media – especially Twitter. As a result, we, as a society needs to become better at detecting bots and limiting their power to shape the online debate, and I hope that by reading this blog I might have broadened your understanding of bots – and hopefully you have picked up a few tricks to spot potential bots appearing in your Twitter feed.


About the author

Daniel Lundgaard is a PhD Fellow at the Department of Management, Society and Communication at Copenhagen Business School. His research investigates how communication on social media (e.g. the use of emotions, certain forms of framing or linguistic features) shapes the ways we discuss and think about organizational and societal responsibilities.


Photo by ?? Claudio Schwarz | @purzlbaum on Unsplash

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

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

By Isabel Froes

Cities are hard and complex systems. With their defined policies, grids and routes, they offer limited space for experimentation, with a low threshold for any type of interference to their regular flow.  To test and prototype [1] in the urban, besides dealing with regulatory procedures, require clear indications of the positive impact those tests might bring. Thus, any change in routine flows is disruptive and not necessarily welcomed by all.

Some of these difficulties have become explicit during the processes carried out by various cities in four EU funded neighbourhood projects, Cities-4-People, Sunrise, MUV and Metamorphosis [2]. These projects have brought together citizens and other key city stakeholders to identify and co-create mobility solutions and approaches to tackling local problems. Each project has had a distinct goal, but all are part of the CIVITAS initiative focusing on ‘sustainable neighbourhood mobility planning and have been running since 2017, with three of them to end in 2020 and another in 2021. In the case of the Cities-4-People project, running in the cities of Hamburg, Istanbul, Oxford, Trikala and Budapest, cities, citizens and transport authorities have worked closely together to co-create and implement solutions addressing congestion, bike parking, safe and new routes to reach public transportation, and more [3].

Primarily, one of the biggest difficulties in deploying urban prototypes deals with permissions, space sharing, closing parts of or an entire street, or pavement, changing traffic routes, etc.

Even when implementing aspects citizens see as valuable and beneficial, such as bike racks, paths, during construction, these processes tend to be perceived as a nuisance. Another aspect stems from the fact that, unless it is a whole new city or neighbourhood been planned, the city, as a canvas, is never blank. Therefore, cities are constantly bound to develop solutions, which are imposed over an existing and fixed grid with very little wiggle room. All true, until March 2020.

The pandemic, through lockdowns and other movement restrictions, has changed the flow of cities almost overnight. For the first time, since the widespread city development focusing on automobiles, cities have had a chance to look at their now empty public spaces and rethink their use and purposes. These changes have forced the neighbourhood projects into a sudden halt, as people’s engagement with urban spaces has been very limited. However, while physical workspaces, shops and many businesses closed their doors, with citizens mostly at home, cities have encountered an unprecedented opportunity to rethink their streets.

In two related mobility examples, Vilnius, Lithuanian capital, the city Mayor has opened up eighteen of the city’s public spaces, free of charge, to bars and restaurants, so they can run while keeping the required social distancing [4].

In Milan [5], over the summer, the city will engage in a large-scale urban prototype, deploying 35km of temporary biking lanes and enlarged pavement areas.

While the city slowly opens up, with most employees still working from home and not commuting as much, citizens, when going out, should have enough space to keep a safe distance, while also experimenting in environmental friendly modes, such as walking and biking.

When some of the neighbourhood projects, such as Cities-4-People, resume in a few months, their cities and citizens might have changed. However, instead of considering the data that has been collected in the projects prior to the lockdown as ‘outdated’ or no longer valid, these projects can consider repurposing this data, using it as a robust baseline to be compared with post lockdown. From a mobility perspective, this ‘new normal’ might prove itself a valuable mobility asset. As people return to their streets, they can experience these known spaces in new formats encountering novel mobility patterns, where people and businesses can repopulate streets differently, reconfiguring city flows.

Furthermore, some of these temporary changes might prove to be popular and become permanent, promoting not only better mobility, but also lower pollution and improved air quality [6], indirectly helping cities leapfrog into achieving some of their sustainable development goals (SDGs). The opportunity to reset busy urban centres is rare; however, as it has occurred and continues to run with the pandemic, more cities and citizens have the unique chance to engage and exploit their cities’ canvas in new ways to seize their days.


References

[1] Implementing a temporary solution

[2] https://civitas.eu/projects/research

[3] https://cities4people.eu/

[4] https://www.theguardian.com/world/2020/apr/28/lithuanian-capital-to-be-turned-into-vast-open-air-cafe-vilnius

[5] In Milan, the lockdown brought a city to an almost complete stand still, decreasing an endemic congestion problem by 30-75%, thus improving air quality. https://www.theguardian.com/world/2020/apr/21/milan-seeks-to-prevent-post-crisis-return-of-traffic-pollution

[6] https://www.mckinsey.com/industries/automotive-and-assembly/our-insights/the-impact-of-covid-19-on-future-mobility-solutions?cid=soc-app


About the Author

Isabel Fróes is a postdoc at MSC Department at Copenhagen Business School working in two EU projects (Cities-4-People and iPRODUCE) dealing with distinct aspects of urban services and sustainability. Her latest publications deal with urban planning and co-creation based on results from the Cities-4-People project. Isabel also has wide industry experience and has worked both as a user researcher and service design consultant for various companies in Denmark and internationally. For more detail please see her Linkedin profile  


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

Lobbying and the virus – three trends to take note of


Photo by ?? Claudio Schwarz | @purzlbaum on Unsplash

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

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

By Lucia A. Reisch

The vision of healthy and sustainable food systems that facilitate appropriate food choices by individuals is gaining momentum in practice and in the marketplace. As the single strongest lever to optimize both human health and environmental sustainability, the food choices we make matter in multiple ways – for our bodies, the environment, and the economic and social fabric of societies. Acknowledging and actively harnessing co-benefits of “win-win diets” is a major focus of current food, farm, environmental, and health policy that aims to positively influence consumer behaviour. A behavioural turn in food policy that puts individuals and their choices at center stage holds promise for manifesting the vision of healthy and sustainable food systems.

As we collectively ponder lessons learned from the coronavirus pandemic, a key aspect will be to consider how to increase resilience of societies and economies in general and food systems in particular, to better endure a crisis in the future.

The Food and Agricultural Organization (FAO) defines resilience as ‘the ability to prevent disasters and crises as well as to anticipate, absorb, accommodate or recover from them in a timely, efficient and sustainable manner. This includes protecting, restoring and improving livelihood systems in the face of threats that impact agriculture, nutrition, food security and food safety.’ [1]

Food chains today are long and globalized, and retail systems are streamlined for efficiency with just-in-time inventories, all adding to the vulnerability of systems. While the basic food provision in Europe continued during the pandemic (not least due to the availability of local food chains), cracks appeared at the retail level with shortages of staples. Admittedly, many shortages were due to stockpiling by frightened people – a behavioural factor rather than a reflection of true supply shortages. One can speculate now that if the crisis were to continue, other dependencies (for instance, on mostly Eastern European farm workers for harvesting) will become obvious.

In a healthy and sustainable food system, the products that are grown, processed, and distributed are health-supporting, safe, environmentally and climate friendly; farmers and laborers work for fair wages under decent conditions; and on the demand side, equal and easy access to affordable, healthy, and sustainable diets as well as nutrition security are provided for today’s and future generations. This sounds like a utopia but it is our future.

The EAT Lancet Commission on Healthy Diets for Sustainable Food Systems recently defined a concrete healthy reference diet that, if applied, can be provided “for an anticipated world population of nearly 10 billion people by 2050 and still stay within a safe operating space on Earth” (Willett et al. 2019).

Balanced and sustainable food systems that stay within the planetary boundaries and provide a minimum level of safety, access, and equity are doubtlessly more resilient – i.e., more robust in times of shocks and crisis – than lean, efficiency-maximizing, far-flung global supply systems. The advantages and necessity of system resilience are likely to constitute one big learning from the pandemic.

Another big learning is that consumer-citizen behaviour is much more malleable and adaptive than many policymakers (and researchers) had thought. People are able and ready to quickly change deeply ingrained habits, adopt new practices (social distancing, home cooking), and adhere to new social norms (wearing masks, hand washing) if – important qualifier – the reasons seem (scientifically) sound, are limited to a bearable time span, and are well explained by a trustworthy government.

Some governments (Sweden, e.g.) rely on voluntary action and “nudging” alone; others (Germany, e.g.) combine harsh bans, intense risk communication, and behaviourally informed policies such as warnings, framing, priming, reminders, defaults, and boosts. We don’t know yet which strategies will work best, but it has already become clear that much can be achieved by using behavioural insights, calling on the responsibility of people, giving positive feedback and reminders, and harnessing the power of (dynamic) social norms and peer pressure.

In the words of the great Danny Kahneman: good policy needs to activate both types of people’s decision-making: the quick, intuitive, emotional “System 1” and the slow, cognitive, deliberate “System 2”.

It is not a new idea that insights into the biases and heuristics, the habits and motivations of consumers can be useful to design effective policies. This is the essence of the new field of Behavioural Public Policy that constitutes these days an International Association of Behavioural Public Policy. The evidence is increasing that a behavioural approach can indeed help design better food policies. What we call Behavioural Food Policy puts people’s needs, biases, and decisions at center stage, offering a specific behavioural lens to existing (hard and soft) policies that can make them more effective. It relies on governance processes that are based on empirical, often experimental testing, learning, and adapting. Public deliberation and participation in these processes help consumer-citizens understand and eventually approve of the policies. This potential of behavioural policies to shift habits and food demand is under-utilized but growing.

This approach is echoed by the global climate change community in the Intergovernmental Panel for Climate Change (IPCC) upcoming 6th Assessment Report. [2] The report identifies two major behavioural changes that substantially mitigate greenhouse gas emissions: avoiding food waste and dietary shifts to plant-based nutrition. As to the former, simple behaviour such as meal planning and creative use of leftovers can help reduce food waste on the individual level; retail can adjust its marketing, and regulators can improve the handling of expiration labels and best-before dates. Regarding the latter, reducing (mainly ruminant) meat consumption and substituting animal protein with field-grown protein are seen as major steps. A diet light in meat is better for one’s health, leads to greater animal welfare, helps reduce food-borne diseases and food crisis, and produces less greenhouse gas emissions. Because individual choices are the basis of any healthy and sustainable food system, understanding and influencing consumer behaviour is a promising route to achieving sustainability, resilience, and healthfulness of our food systems and society generally.


References

[1] http://www.fao.org/emergencies/how-we-work/resilience/en/.

[2] The author is a contributing author to this IPCC AR6 chapter.


About the author

Lucia A. Reisch is Professor of consumer behaviour and consumer policy at the Department of Management, Society and Communication (MSC) within the CBS Sustainability. Her research focuses on behavioural economics, behavioural public policy, sustainable consumption (in particular, energy, food and health, active mobility and fashion), intercultural consumer behaviour, consumers and digitization, as well as consumer policy.


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


Photo by Chad Stembridge on Unsplash

In Movement from Tanzania to Northern Italy to Denmark

By Lisa Ann Richey

This article is based on her previously written piece for the Centre for Business and Development Studies.

My first memory of the Corona virus, before we became politicized enough to refer to it as COVID-19, or the “new” Corona virus—or for some special politicians, the “Wuhan” virus—was in Tanzania. Enjoying the evening breeze from the Indian ocean in the public area of our workshop hotel, I sat with a couple of our research team members catching up on life via apps on the smartphone. I came across a small shitstorm on my social media about our Prime Minister Mette Frederiksen. Technically speaking, she is not ‘my’ Prime Minister as my citizenship application was denied last year on the grounds of having spent too much time living outside of the country in South Africa, Italy and the US during the past 20 years. The “Wuhan virus” bleach-your-lungs guy, is actually the current head of the nation where I vote.

Yet, our Prime Minister Mette Frederiksen was in the media adamantly refusing to issue a public apology for a Danish cartoon that had been published on January 27th by Jyllands-Posten, a second-rate, nationally distributed newspaper, infamous for publishing the 2005 “Muhammed cartoons” which led to international violence, boycotts and around 200 deaths. The latest cartoon was a drawing of the Chinese flag with its five gold stars replaced by five virions of Corona. China’s embassy accused the cartoonist of insulting China and demanded an apology. The Danish Prime Minister refused and her response is on record as saying ‘we have freedom of expression in Denmark – also to draw.

Most politicians and many Danes supported the cartoonist, attributing the outrage of many Chinese as ‘cultural difference.’ The newspaper editor defended that the publication was not ‘poking fun of the situation’ stating: ‘We cannot apologise for something we don’t think is wrong. We have no intention of being demeaning or to mock, nor do we think that the drawing does. As far as I can see, this here is about different forms of cultural understanding.’ When the Corona flag was published, 100 deaths from the virus had been documented in the Chinese city of Wuhan and ‘cultural’ understandings of right and wrong ways to portray the virus, to call its name, to recognize its symptoms, to document its death rates, to protect citizens within closed borders were just beginning.

But it was only January, and our international research team starting a five-year project on how people outside of the formal humanitarian sector respond to crises in Tanzania, had no idea the ways that this Coronavirus would come to affect us. We still don’t. We live quite specifically in Copenhagen, Dar es Salaam and London. But many of us are a bit of an Afropolitan/Cosmopolitan mish-mash by parentage— Chagga/Meru, British/Dane, American/Italian, Kenyan/Tanzanian and we have lived across various countries in Africa, Europe and Asia for work, studies, or by the accident of birth. We are all employed by the state in university jobs. For all of us, these are good jobs. We are comfortable. But, now, we are uncomfortable.

We are in different stages of our careers—from doctoral students to full professors—and these days, as the global pandemic settles over all of us in different and forcibly separate parts of the world, we feel differently the burdens of different responsibilities. One of our team wrote to me: ‘I work like hell while managing a family who is also sick and tired of being locked up… I’m trying to manage 200 staff members’ teaching, supervision and examination responsibilities, plus their externally funded research projects, their problems with spouses, kids and dogs… I want my life back…’

Another of us had to travel upcountry to Kilimanjaro to look after her ageing mother who lives alone on a farm. I imagine her weighing the risks of the transport, the confusing messages from the government about whether anyone should travel, or even leave their house, of whether the handful of cases that had been officially reported in Tanzania were exaggerated hyperbole or grossly under-reported with those of your own mother, and getting on the bus. I would have done the same.

But I am getting ahead of the story, back in January when we were planning how to study earthquakes and floods, refugee camps and their communities and perhaps locusts, we had no possible imagination of the new crisis that would consume us. We held our workshops, discussed the academic literature, planned the plans, drafted the MOUs, enjoyed our barbecue and good conversations and parted ways. Since January in Dar es Salaam, our team’s intellectual energy has become professional, intellectual, political and highly personal about whether to hoard supplies or wear medical masks, how much hand washing with which kind of water could be enough, how would people help each other when the most helpful thing they were told to do was to stay apart?

My flight went from Dar es Salaam to Istanbul. When I arrived in the crowded airport, something felt a little different to me, but I couldn’t quite figure it out. As I neared the gate for my connecting flight to Venice, I noticed that about half of the passengers were wearing medical masks. Thinking about our Danish Corona-flag incident, I remembered to check my cultural bias as I noticed the masks around me. Many appeared Asian and I know it is good hygiene to wear masks when in crowded public places, so I thought it mostly a sign of politeness. Yet, many were also Italians, headed on the plane with me. Not checking my cultural bias so effectively when considering a culture that I now also claim as my own, I remember thinking, ‘hysterical, over-reacting Italians.’


About the author

Lisa Ann Richey is a Professor in the Department of Management, Society and Communication at the Copenhagen Business School.


More about coronavirus pandemic:

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


Photo by Matt Seymour on Unsplash

Supply Chain Responsibilities in a Global Pandemic

By Jette Steen Knudsen, Erin Leitheiser, Shaidur Rahman & Jeremy Moon

What is the responsibility of Western retailers to the workers who make their garments as the coronavirus forces factories to shut down?

Shopping malls are closed, gatherings are banned, thousands of employees have been furloughed, and movement outside of one’s home is discouraged if not outright illegal.  This has meant bad news for apparel brands and retailers as nervous customers cease buying. In the U.S., for example, retail sales in March were down almost 9% compared to in February.  Those brands and retailers which have built their businesses on a fast fashion model – predicated on the continuous churn of high volumes of cheap clothes – face unprecedented challenges and questions about responsibilities in the face of the COVID-19 pandemic. 

Retailers have responded in different ways.  As they have had to shut down their stores many have stated that they will not pay rent. For example, German sportswear producer Adidas stated (March 26 200, Reuters) that

“Almost all over the world there is no normal business anymore. The shops are closed. Even a healthy company like Adidas cannot stand this for long”.

Adidas was one of a string of retailers in Germany that said they wouldn’t be paying their landlords while their stores are closed as part of efforts to stem the coronavirus spread. Adidas said it would need credit even after staff cut their working hours, executives waived part of their pay and the company stopped share buybacks. Adidas’ decision was met with an uproar in Germany eventually forcing the company to formally apologize and to report that it planned to suspend a planned 1 billion euro ($1.09 billion) share buyback in an effort conserve cash after closing its retail outlets in Europe and North America. Adidas also said it would pay rent.

In Denmark, Anders Holck Poulsen, the owner of the clothing company Bestseller and Denmark’s wealthiest man, also announced that the company would not pay rent for its stores. Bestseller (parent company for brands like Vera Moda, Jack & Jones, Pieces, and Name It, among others) later reversed the decision following a public outcry and the CEO went on national television to apologize. Bestseller subsequently laid off 750 employees and sought financial support from the government.  This decision was met sharp with sharp criticism because over the last five years Mr. Holck Poulsen has paid DKK 7.6 billion (more than $ 1 billion) in dividends to his private holding company Heartland.

Not all companies have responded this way. Patagonia, for example, has promised that all of its employees will continue to receive their regular pay during store closures.

However, with many large brands scaling back their social responsibility in the Western part of the world, what kind of responsibility can we reasonably expect from Western retailers in places such as Bangladesh?

Bangladesh is heavily dependent on apparel production. Apparel comprises more than 80% of the country’s total export revenue and the sector employs more than 4 million workers, most of them women.  However, in recent weeks many Western brands have cancelled their orders from Bangladesh, and it is estimated that more than 2 million workers have lost their jobs.  H&M is the largest buyer of garments from Bangladesh and has reluctantly agreed to take and pay for the shipments of goods already manufactured as well as those that are still being produced. Inditex, PVH and Marks and Spencer have also agreed to pay suppliers for orders that are already produced but not all companies have done so. Primark, for example, has cancelled orders, and virtually all buyers have pulled orders that have not yet gone into production.  At the end of March 2020 orders for more than $1,5 billion had been cancelled, and Bangladesh reported -19% year-on-year export volume for the month.

What is the responsibility of large brands like Bestseller or H&M for their supplier factories in Bangladesh? Western brands have a long tradition for stating their commitment to CSR in global supply chains, including elaborate Codes of Conduct for social and environmental performance in supplier factories. Bangladesh has staked its claim as the low-cost producer of garments, and its costs and production capacities cannot be easily matched elsewhere in the world. The model of fast fashion needs Bangladesh, and Bangladesh, in turn, needs fast fashion. 

Now that crisis reigns upon all of us in the form of a global health pandemic, it is the most vulnerable of workers who have been left in the lurch, be it the retails associates who stock shelves or the stitchers who sew together T-shirts.  As buyers cancel orders, few recognize the perilous position that these workers are left in. For those working on the factory floor in Bangladesh, more than 2 million have been furloughed, many without pay, despite a governmental scheme intended to address these issues.  The meagre wages of garment factory workers have not allowed for savings that could support them in such times, and the prospect of long-term closures – or at least, no orders to fill and therefore no paid work – means almost certain disaster for them and their families. 

Garment workers in Bangladesh have risen up in protest, stating that

“…we don’t have any choice.  We are starving.  If we stay at home, we may save ourselves from the virus.  But who will save us from starvation?”

(13 April 2020, The Guardian).

While some brands, like Primark, have set up charitable funding pools to help support workers, the money has yet to make it to their pockets, and the “charitable” framing of this funding on behalf of brands speaks volumes about what they see as their responsibilities.  Yet, when the crisis passes and shopping malls re-open, brands will again be reliant upon these workers to satisfy their demand for an endless supply of cheap garments. 

Given that cheap labor is a fundamental need for fast fashion companies to survive, shouldn’t brands likewise ensure the survival of those on which it depends? 


This is the first in a series of blogs which will further explore the responsibility of the Bangladesh government, factories, Western governments and civil society organizations for dealing with COVID-19 in places like Bangladesh.  


About the authors

Jette Steen Knudsen is Professor of Policy and International Business at the Fletcher School of Law and Diplomacy at Tufts University and holds the Shelby Collum Davis Chair in Sustainability.  She is also a Velux Fellow at Copenhagen Business School where she is part of the Regulation of International Supply Chains (RISC) project

Erin Leitheiser is an Assistant Professor at Copenhagen Business School and Project Manager of the Regulation of International Supply Chains (RISC) project

Shaidur Rahman is Professor of Sociology at BRAC University where he is part of the Regulation of International Supply Chains (RISC) project

Jeremy Moon is Professor of Sustainability Governance and Director of the Sustainability Centre at Copenhagen Business School.  He is the Project Coordinator of the Regulation of International Supply Chains (RISC) project.

Photo by ILO Asia-Pacific

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

Normalizing Sustainability

By John Robinson, University of Toronto

We often hear the argument that, given the urgency of climate change and sustainability concerns,  significant changes to individual behaviours and lifestyles are required. This has led to a wide array of public education and climate literacy campaigns aimed at changing such behaviours. In this blog, I will argue that some fairly strong research findings suggest that such campaigns are of limited value in influencing behaviour change, and moreover that focusing on changes in individual behaviours may be distracting us from much more significant possible steps.

There are many models of behaviour change in the literature, and of the relationships among values, attitudes, intentions and behaviours. It is probably fair to say that many of the most influential conceptualizations of behaviour change assume that most individual behaviours are the result of some form of conscious decision-making about desirable outcomes based in turn on some assessment of the consequences of different courses of action. [1]

On this view, people act in environmentally irresponsible ways because they lack the information they need to make better decisions. Such an ‘information deficit’ model leads in turn to what we might call a persuasive communication approach to stimulating behavior change, which assumes that providing more information as to those consequences, through information provision, educational programs, and science and climate change literacy campaigns, will lead to better and more environmentally responsible decision-making [2].

Unfortunately, the relevant research on the relationship between information and behaviour shows that persuasive communication approaches based on an information deficit model are not only ineffective in changing behaviours in the desired direction [3], but may in fact have perverse consequences.

Studies of the relationship between knowledge and attitudes have found that increased science literacy does not lead people to become more concerned about climate change, but on the contrary, actually increases polarization on this issue[4]. It seems that educating people on the science of climate change, or other sustainability problems, will not lead them to change their views on the problem itself, but instead may further reinforce their prior position.

In fact there is evidence from many fields of study, going back multiple decades, that information is only weakly connected to behaviour change. Studies of the effectiveness of energy efficiency programs [5], research in health promotion[6], or community-based social marketing[7], over many decades have all reached similar findings. So widespread are these findings that it can be said, in the words of my colleague David Maggs that:

The best evidence that information does not change behaviour is that we have decades of evidence in multiple fields that it does not do so, yet we continue to create and implement pubic education campaigns intended to change individual behaviour.

While this is bad enough, the problem gets worse.

It turns out that it is not clear that changing individual consumption behaviour is the right goal anyway. A number of studies have shown that there is no significant difference in either the carbon or ecological footprint of individual who cares deeply about environmental issues and behave accordingly, and those who do not care at all and do not behave in environmentally responsible ways [8]. The reason is that the ecological and carbon footprints of individuals are determined much more by their income than by the degree to which they choose more environmentally appropriate behaviours such as recycling or buying sustainable products.

So we seem to be in a depressing circumstance: information and literacy programs won’t change behaviour; moreover, it wouldn’t much matter, in term of overall environmental impact, if they did.

But rather than ignoring this evidence and intensifying our efforts to educate people into sustainability, or else throwing up our hands and retreating into apathy, perhaps a more fruitful approach is to reframe the original questions and ask whether a different approach altogether might be useful, on both these questions.

With regard to information provision, instead of a persuasive communication approach, it might be more useful to take what we might call an emergent dialogue approach [9]. Instead of assuming that we know the right answers and we have to get those answers into the heads of our audience, perhaps we need to listen as much as we speak, and to find two-way approaches to dialogue in order to co-create narratives with citizens that describe our circumstances in ways that are more faithful to the disparate views and values of different groups and that thereby offer the possibility of finding common ground on controversial societal problems.

The goal switches from a focus on changing behaviours to a focus on trying to create shared narratives, in order to better inform collective decision-making processes, and to foster social mobilization in support of policy change.

With regard to individual behaviour change, perhaps we need to rethink our ideas about change itself. As long as sustainability requires change, then it is fragile because human activities and practices will often snap back to prior unsustainable normals. Instead, we need to normalize sustainable practices, so that they become the default, not the required change [10]. In this connection, it might be useful to move from a focus on conscious individual behaviour and pay more attention to more collective processes of activity. There has been an upsurge of work on social practice theory approaches to human activity, which suggests that much of that activity is unconscious and collective, connected to social processes and relationships, and social and cultural norms [11]. Can a focus on collective social practices lead us towards processes of normalization of sustainability?

Following this line of thought, it is not about encouraging behaviour change instead of technological change, but of exploring how the overall socio-technical system itself, including powerful social norms, influences and is influenced by individual choices and actions, including political demands or support for changes in collective decisions. Perhaps we need to try to create ‘virtuous cascades’ 12 of positive normative change and identify leverage points that will allow us to foster and encourage more sustainable outcomes. Trying to convince people to change their lifestyles in the absence of change in the overall system will be ineffective and may even work against larger system change.


About the author

John Robinson is a Professor at the Munk School of Global Affairs and Public Policy and the School of the Environment at the University of Toronto.  He is also an Adjunct Professor at Copenhagen Business School. His research focuses on the intersection of climate change mitigation, adaptation and sustainability; the use of visualization, modelling and citizen engagement to explore sustainable futures; sustainable buildings and urban design; the role of the university in contributing to sustainability; creating partnerships for sustainability with non-academic partners; the history and philosophy of sustainability; and, generally, the intersection of sustainability, social and technological change, ways of thinking, and community engagement processes. 

References

[1] E.g. see Ajzen, I. (1991). The theory of planned behavior. Organizational Behaviour and Human Decision Processes, 50(2), 179-211

[2] Masud, M.M., Al-Amin, A.Q., Junsheng, H., Ahmed, F., Yahaya, S.R., Akhtar, R., & Banna, H. (2016). Climate change issue and theory of planned behaviour: relationship by empirical evidence. Journal of Cleaner Production, 113, 613-623. See the discussion in Kollmuss, A., & Agyeman, J. (2002). Mind the Gap: Why Do People Act Environmentally and What are the Barriers to Pro-Environmental Behaviour? Environmental Education Research, 8(3): 239-260.

[3] See, for example, Kollmuss & Agyeman, op. cit.; Sheeran, P., & Webb, T.L. (2016). The Intention-Behaviour Gap. Social and Personality Psychology Compass, 10(9), 503-518; Ungar, S. (1994). Apples and oranges: probing the attitude-behaviour relationship for the environment. Canadian Review of Sociology, 31(3); Steg, L., Perlaviciute, G., & van der Werff, E. (2015). Understanding the human dimensions of a sustainable energy transition. Frontiers in Psychology, 6; Owens, S. 2000. `Engaging the public’: information and deliberation in environmental policy, Environment and Planning A, 32, pages 1141-1148; Shove, E. 2010. Beyond the ABC: climate change policy and theories of social change, Environment and Planning A, 42, 1273-1285. 

[4] Kahan et al, (2012) The polarizing impact of science literacy and numeracy on perceived climate change risks, Nature Climate Change, 2(10), pp.732-735; Drummond, C., & Fischhoff, B. (2017). Individuals with greater science literacy and education have more polarized beliefs on controversial science topics, Proceedings of the National Academy of Sciences, 114(36), 9587-9592.

[5] Stern, P. C. 1986. “Blind spots in policy analysis: What economics doesn’t say about energy use.” Journal of Policy Analysis and Management, 5(2), 200-227; Hirst, E. (1990). Progress and Potential in Evaluating Energy Efficiency Programs. Evaluation Review, 14(2), 192–205; Robinson. J. (1991). “The proof of the pudding: Making energy efficiency work.” Energy Policy, 19(7), 631-645; Abrahamse, W., Steg, L., Vlek, C., & Rothengatter, T. (2005). A review of intervention studies aimed at household energy conservation. Journal of environmental psychology, 25(3), 273-291.

[6] Green, L. W., & Kreuter, M. W. (1993). Health promotion planning: An educational and ecological approach. McGraw-Hill

[7] McKenzie-Mohr, D. (2011). Fostering sustainable behavior: An introduction to community-based social marketing. New society publishers.

[8] Csutora, M., 2012. One more awareness gap? The behaviour–impact gap problem.  Journal of Consumer Policy, 35(1), pp.145-163; Tabi, A., (2013). Does pro-environmental behavior affect carbon emissions. Energy Policy, 63, pp.972-981; Moser, S., & Kleinhückelkotten, S. (2018). Good intents, but low impacts: diverging importance of motivational and socioeconomic determinants explaining pro-environmental behavior, energy use, and carbon footprint. Environment and Behavior, 50(6), 626-656.

[9] Robinson, J. (2004) “Squaring the Circle: Some thoughts on the idea of sustainable development”, Ecological Economics, 48(4): 369-384; Antle, A. N., & Robinson, J. (2011). Procedural Rhetoric Meets Emergent Dialogue: Interdisciplinary perspectives on persuasion and behavior change in serious games for sustainability; Bendor, R., Lyons, S. H., & Robinson, J. (2012). What’s there not to ‘like’? sustainability deliberations on facebook. JeDEM-eJournal of eDemocracy and Open Government4(1), 67-88; Maggs, D. and Robinson, J. (2016) “Recalibrating the Anthropocene: Sustainability in an Imaginary World”, Environmental Philosophy, 13(2), 175-194; Robinson, J. and Cole, R. (2015) Theoretical underpinnings of regenerative sustainability, Building Research & Information, 43(2), 133-143; Westerhoff, L. and Robinson, J. (2013) “’Practicing’ narratives: exploring the meaning and materiality of climate change”, Proceedings of Transformation in a Changing Climate, June 19-21, 2013.

[10] John Robinson, “Normalizing Sustainability: from behavior change to metamorphosis”, Keynote Presentation at IST2019: Accelerating sustainability transitions: Building visions, unlocking pathways, navigating conflicts, Ottawa, Jun 25 2019

[11] Gram-Hanssen, K. & Georg S. 2017. Energy performance gaps: promises, people, practices, Building Research and Information 46(1), 1-9; Strengers, Y., & Maller, C. (Eds.). (2014). Social practices, intervention and sustainability: Beyond behaviour change. Routledge; Shove, E., Pantzar, M., & Watson, M. (2012). The Dynamics of Social Practice. London, UK: SAGE Publications; Hargreaves, T. (2011). Practice-ing behaviour change: Applying social practice theory to pro-environmental behaviour change. Journal of consumer culture, 11(1), 79-99; Reckwitz, A. (2002). Toward a theory of social practices: A development in culturalist theorizing. European journal of social theory, 5(2), 243-263.

[12] Homer-Dixon, T. Coronavirus will change the world. It might also lead to a better future. The Globe and Mail, Mar 5, 2020  https://www.theglobeandmail.com/opinion/article-the-coronavirus-is-a-collective-problem-that-requires-global/

Photo by Francesco Gallarotti 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.

AI: A new culprit in missing the sustainability mark?

Lara Anne Hale

Artificial intelligence (AI) is championed as being the future driver of business: everything from human resources to surgery is supposed to become perfectly effective. But what if AI actually becomes a culprit blocking the way forward for sustainability?

Bias in AI

An example, to get us started:

Bob and Joe are colleagues. They are work friends, and they share many of the same worldviews – as well as biases. They are jointly programming the algorithm for machine learning that will train an AI to behave as they expect it should. In a number of ways that are difficult to detangle: Bob and Joe’s Biases → Machine Learning → AI.

In a recent article in The New York Times, AI professionals explored how to push back against social bias, as it “can be reflected and amplified by artificial intelligence in dangerous ways, whether it be in deciding who gets a bank loan or who gets surveilled.” As Ola Russakovsky points out in the article, there are all kinds of bias in AI because it reflects the way our world already is.  I’m here to point to one of those different kinds of bias – more specifically, institutional bias.

AI for Sustainable Building

In my day-to-day research, I’m regularly confronted with one such institutional bias in the building industry: cost savings and energy efficiency are more important than human well being. This long standing bias persists, despite whole cities filled with buildings that are harmful to health, hardly last beyond 25 years, and still do not achieve the desired energy performance. In trying the avoid dealing with lovely but complicated human beings, the building industry gets in the way of sustainable building.

After all, it’s only human. Or is it? There is increasing pressure for AI to be integrated into systems for both building construction and facilities management, though both applications perpetuate the bias for economic and energy efficiencies. Not surprisingly, this is what AI is meant for: to do what we already do, but better. So how can we innovate AI that does something that we don’t already do – for example, to consider more comprehensive sustainability?

Urban Tech and Co-Innovation

Yet, society is not fixed, and there are inspiring efforts to continuously innovate our industrial systems by bringing together established businesses and startups for problem solving. One well known example of this is the BMW Startup Garage in Germany. Last year, we saw the advent of such a program for the built environment here in Copenhagen, called Urban Tech, which will run three cycles from 2019 through 2021.

In the process of working with the 2019 VELUX Group – Foobot team on innovating AI for better indoor air quality, I was surprised to find that same institutional bias reflected from Foobot. The implications were that instead of training the AI to respond to people, their health and their needs – as academic and industrial research have indicated is critical for sustainable building – they focused the AI on energy efficiency. But ultimately, I found this to be an exercise of optimism.

Co-innovation gave us the opportunity to unhatch hidden elements of AI bias and to work together to figure out the next steps forward for bringing digitization and sustainability together in the built environment.

Sustainability Training for AI

Although there are calls to remove AI bias and to set up regulatory mechanisms to control for it, I wonder if either of these are feasible (a pondering shared in this WIRED Magazine article). AI is, after all, what we make of it. Though we cannot do what is not feasible, we can ponder what is desirable. In line with the voluntary integration of sustainability into corporate reporting, as well as building standards, what if we integrated sustainability considerations into frameworks for training AI?

Well, an android can dream…

Join and discuss these and related AI topics at the Reshaping Work’s AI@Work Conference in Amsterdam 5-6 March 2020. Lara will be presenting her work on “Faster horses: Collaborative AI innovation between incumbents and startups.”


About the author

Lara Anne Hale, Ph.D., M.Sc., Assistant Professor, Industrial Postdoc Fellow with CBS and VELUX. Lara conducts transdisciplinary research on sustainability in the built environment, including aspects of digital transformations, circularity, user-centered design, and systems thinking. Her current project focuses on business model innovation for smart buildings in the BLOXHUB Science Forum ‘Smart Buildings & Cities’ research group, supported by the Danish Innovation Fund and Realdania.


Read more by the same author

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Researchers in BLOXHUB seeking to improve indoor climate

Can Your Green Building Rub Off On You?

Need an SDG Solution? Hack it.

If at first you don’t succeed, build, build again


Photo by Franck V. on Unsplash.

How SDGs help us see buildings through a different lens

By Ingrid Reumert

Despite a lot of focus on climate change recently, the impact of one ‘hidden climate’ on people’s lives often goes unnoticed – the indoor climate. And the indoor climates in the buildings that we normally feel most comfortable in – our homes – are much worse than we are aware of.

Safe and sound at home?

Our homes are traditionally seen as places where we recharge our batteries. They are where we seek shelter and refuge from the hustle and bustle that we often experience in our everyday lives when away from them. As we wind down at the end of a busy day in the comfort of our homes, we take it for granted that we can relax, knowing that our health is not at risk when inside.

However, there’s increasing evidence that although we might arrive home safe and sound, the time we spend at home might not be safe and sound after all.

As ‘safe as houses’?

The saying ‘it’s safe as houses’, which is used to describe things as being completely safe, cannot be used about many homes in Europe. We know from our Healthy Homes Barometers, an annual research-based report designed to take stock of Europe’s buildings, that one out of six Europeans lives in unhealthy homes. For children in Europe, it’s worse, with one out of three being exposed to health risks in their homes. And the health risks are not just isolated to our homes. The same also goes for the environments inside buildings where we work and learn.

Furthermore, we know that people spend 90 percent of their time indoors, where the air can be up to five times more polluted than outside. The potential risks to people’s health and wider society are not insignificant, with poor indoor climates directly leading to conditions such as asthma or allergies, due to dampness and mould.

Ongoing dialogue and modified solutions

For years we have been using such well-documented research to engage in dialogues with legislators, housing professionals, building owners and industry representatives to push for steps to make buildings healthier. In recent years, we have also modified our solutions, which bring daylight and fresh air through roofs, to be more automated and also compatible with digital technologies and the internet of things, and thereby make creating healthy indoor climates hassle-free.

Using SDGs to push harder for healthier indoor climates

At VELUX Group, it is our strong belief that if indoor climates are not good for our health, then we’ll see problems for individuals and for society. Now, with the help of the United Nations Sustainable Development Goals, we have an extra toolbox to support our efforts to address this.

We believe that by embracing this common global language of SDGs, we can leverage our efforts to make buildings healthier.

More specifically, we use three SDG goals to help people see the world through a different lens and to reveal the possible negative effects on their health from the ‘hidden climate’ – the indoor climate. We do this by showing how good indoor climates and healthy buildings can safeguard good health and well-being (SDG 3) and also how this can contribute to more sustainable cities and communities (SDG 11), with the help of partnerships for the goals (SDG 17).

Revealing what’s right under our noses for a more sustainable future

With much of the current climate change and sustainability focus on natural renewable energy sources or companies’ steps to reduce their carbon footprints, the climates inside our homes and other buildings, and their potential negative effects on our health and well-being continue to be ignored. That’s why the VELUX Group will persist with research and activities to boost indoor climate awareness and continually improve our products, to address what’s right under our noses but often overlooked – the indoor or hidden climate. By improving indoor climates to help make buildings healthier, we are confident that we will contribute to a more sustainable future.

About the Author

Ingrid Reumert – VP, Global Stakeholder Communications & Sustainability at VELUX Group

Photo by Timothy Buck on Unsplash

Further reading: Researchers in BLOXHUB seeking to improve indoor climate

Regulating 300,000 Years – Nuclear Waste, Sustainability and the Need to Talk to the Distant Future

By Andreas Rasche

Whenever we think about regulating sustainability problems, we usually think about the here and now or at least about the not too distant future. Even with regard to climate change, which clearly is a problem for future generations, regulators have a time horizon of not more than 30 or 40 years. The Paris Accord is a case in point – it sets targets for 2050. Also, the European Union’s climate strategy sets goals until 2050. But, what happens if regulators need to think about a very distant future?

Consider the example of nuclear waste. The challenge is not only to find a secure location to store the byproducts of burning uranium. The challenge is also, and maybe most of all, to prevent future generations to disturb the deep underground storage facilities, be it intentional or not. This requires “talking to” distant future generations. Chlorine-36 (one of the byproducts) has a half-life of approximately 300,000 years. Compare this to the roughly 40,000 years that the behavioral homo sapiens is supposed to be around – i.e. human beings which engaged in the development of language and early forms of religion – and you get an idea about the scope and scale of the underlying challenge.

Deep underground storage is, at least as of now, the only option to deal with nuclear waste. In the 1980s, some governments considered the idea of simply firing nuclear waste into space. This idea was rejected due to security concerns. Right now, there are few final repository sites for nuclear waste, such as the US-based Waste Isolation Plant in New Mexico.

>>How do we secure these sites from future human intervention? What is needed is a way to communicate with future generations. <<

By definition, the future is unknown and we do not know whether future generations may try to dig at the sites where nuclear waste is disposed. There are many reasons why such underground storage sites could be interesting for future generations, ranging from pure curiosity to a danger that they misread/misinterpret warning signs or other artifacts. What will be a symbol of danger in, say, 150,000 years from now? How does memory survive?

Governments around the world have developed different approaches to talk to the future. One possible US solution includes giant granite markers that are supposed to prevent human intervention (see picture). The US Department of Energy writes:

“Regulations require that waste disposal sites use markers and other controls to indicate dangers and locations of waste.”

One problem with these giant markers is exactly that they are giant and that they are supposed to signal fear and danger. What, however, if signals of fear and danger incite curiosity? The US facility will not be closed until 2050, so there is still time to decide otherwise.

Source: US Department of Energy (Concept: Mike Brill, Drawing: Safdar Abidi, Image courtesy of BOSTI)

If a written message were to be attached to any warning markers, how would such a message look like? One current proposal is to use the message (see below) which is then to be translated into every written UN language. Although there is no consensus on the content and nature of the message among members of the Nuclear Energy Agency (NEA), it is clear that such a message needs to be developed.

“This place is a message… and part of a system of messages …pay attention to it! 
Sending this message was important to us. We considered ourselves to be a powerful culture. 
This place is not a place of honor … no highly esteemed deed is commemorated here… nothing valued is here. 
What is here was dangerous and repulsive to us. This message is a warning about danger. 
The danger is in a particular location… it increases towards a center… the center of danger is here… of a particular size and shape, and below us. 
The danger is still present, in your time, as it was in ours. 
The danger is to the body, and it can kill. 
The form of the danger is an emanation of energy. 
The danger is unleashed only if you substantially disturb this place physically. This place is best shunned and left uninhabited.”

Trauth, K.M., Hora, S.C., & Guzowski, R.V. Expert judgment on markers to deter inadvertent human intrusion into the Waste Isolation Pilot Plant. United States. doi:10.2172/10117359, pp. F49-F50

Alternative?

An alternative solution would be to adopt a more evolutionary approach. Such an approach would not put the message into granite (or other materials). Rather, it would create “an enduring culture around the nuclear waste depositories.” (Financial Times, 14 July 2016) Keeping the memory alive, then, would be an accomplishment that is passed from generation to generation (e.g., via stories, exhibitions, songs, art). As language and symbols change over time, this evolutionary approach would adapt the message to the contextual particularities that evolve in the future. Such a community-based approach would then rely on locals, who live around a waste storage site, to warn others.

There are pros and cons for both approaches and it is uncertain what regulators will do. However, what this example shows is that thinking about regulating actions in the distant future requires drawing on insights from multiple disciplines, ranging from linguistics to nuclear scientists and anthropologists.

Does all of this have something to do with sustainability? Just think about a world in which we cannot securely seal nuclear waste…

About the Author

Andreas Rasche is Professor of Business in Society at CBS and Associate Dean for the CBS Full-Time MBA Program. He is also Visiting Professor at Stockholm School of Economics. More at: www.arasche.com.

By the same author:

Why Corporate Sustainability is Bullshit (And Why This is a Good Thing)

The Ethical Blindness of Corporate Sustainability

Photo by Ra Dragon on Unsplash

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

Is it a right policy to focus on SDGs during Economic Slowdown?

By Anirudh Agrawal and Ashish Tyagi

Economic problems of India were not addressed either in the 2019 electoral debates or in the recent annual budget. Markets are showing a deep imbalance between demand and supply, leading to a significant rise in loan defaults, banking crises and job losses.

MSME has not shown a tendency to grow or create jobs along expected lines despite a nationwide program of targeted lending. Indiscriminate lending in the past has increased Non-Performing Assets (NPAs) in the banking sector. The industry is still adjusting to the new GST regulations while the real estate sector has still not recovered from the demonetization shock. On top of all this, pollution is at an all-time high and climate change is manifesting itself in the form of droughts and floods in different parts of the country.

In such a slowdown, a knee-jerk policy reaction is to spur investment and growth through any means possible, including reversals on climate and Sustainable Development Goals (SDGs). Quite recently, the government allowed 100 percent FDI in the coal mining sector to spur a revival.

But in this article, we argue that a renewed focus on Sustainable Development Goals (SDGs) presents an opportunity to revive the economy, create a new wave of jobs and potentially increase the competitiveness of Indian economy vis-à-vis the SDG laggards. The discussion that follows is in the context of India but is equally relevant for the rest of the developing world.

NPA crisis and an opportunity towards SDG oriented portfolio

The main reason for a steep rise in credit default rate is that while industries expanded capacity over time, domestic and global demand has slowed down considerably, stranding the new assets. The lack of market demand causes firms to default on loans. This increases the stress on the banks, which consequently, stall the liberal credit lines to firms, further weakening the economy.

One of the significant factors causing the NPA crisis in India is the MSME loan portfolio. MSME is the backbone of any economy. In developing countries, MSME account for 90 percent of job creation and economic activities. Over time, through hard work, market and government support, these MSME entrepreneurs are able to grow, engage in employment creation, disruptive innovation and ultimately become unicorns, which are nascent businesses with high market valuation and growth potential.

>>>However, despite the important role in job creation and liberal credit lines, MSME entrepreneurs in developing countries generally remain poorly skilled, lack proper business support, access to markets and are many times bullied by bigger firms. In the end, a great deal of capital channelled to MSME is not converted into higher value. <<<

To transform the MSME sector, government and other business-sector actors must treat MSME as students who need to learn and adopt skills related to competitive management, sustainability, marketing and financial reporting so that competitiveness and sustainability become inherent within the firm. MSME entrepreneurs can aspire globally through exposure from government-sponsored programs to attend MSME events in Denmark (for their dairy and animal industry), Germany (manufacturing), Italy (leather and fashion). They can learn more about international market trends and technologies where the bottom lines are firmly grounded on SDG compliance.

Unlike bigger players which are slow, suffer from legacy issues; MSME is flexible enough to embed elements of sustainability and SDGs in their supply chains and value creation processes.

To survive and grow in a world with increasing climate change regulations, better cooperation is required between public institutions, banks and MSME entrepreneurs to work hard in sync, learn new practices and standards. Long-term growth requires MSME to make sustainability and SDG compliance inherent in the business plan, business model, management structure and type of service and product offered.

>>> Indian banks must actively focus on new industries creating products with lower environmental footprints. <<<

For example, instead of providing loans to typical plastic manufacturing SMEs, they must provide loans to entrepreneurs setting up green-materials factories, alternative plastic (biodegradable) factories, bio-diesel, or EV vehicle factories, which are environmentally efficient, follow international standards and are helping the nation achieve its Paris Agreement targets. The growth of competitive, innovative and greater SDG compliant MSME would make Indian economy stronger and mitigate job crises.

SDG focused Real-Estate Sector Regulation

Another cause of NPA crises in India is the rising real-estate inventory. Real estate sector was one of the largest employers during the 2004-2016 boom years of India (which is also true for most of the developing world). The assumption among investors during that period was that the real-estate will continue to grow and their investments will remain secure and ensure above-market returns. However, in the boom period, real-estate prices far exceeded their value, causing market failure in the current economic downturn.

But during economic downturns, it is relatively easier for politicians to make difficult decisions (as the public mandate is easier) and enforce innovative policies.

To address the issue of real estate inventory, the government must introduce regulations in the real estate market with quality controls, sustainability measures, green building codes, controls on the number of floors constructed, the green area within the apartment, restrictions on distance from the essential public services like a train station, police station, college, hospital, schools.

The regulations must forcefully move the industry towards significant sustainability goals (like those in Western Europe) with higher compliance on long-term sustainability, energy efficiency, and reliability. In addition to explicit sustainability actions like certification, greenified surroundings; firms and the government must focus on developing the real-estate sector, which is firmly embedded in a social, cultural and artistic milieu. Research has shown that housing where the communities have active social and cultural interaction tends to have higher value and lower crime.

Specific SDG driven controls would decrease the supply, increase the quality offered, and would significantly increase the value of the real-estate sector. If the buyers feel that their real-estate investments have greater value for a more extended period, the buyers and sellers will invest in the sale and purchase of the real estate, which would relieve the banks from possible NPA risks. The increased transactions in the real estate market would generate liquidity in the market that would further spurn growth. This suggestion on regulating the market stands in contrast to current appeals for liberalizing the real-estate sector. The liberalization of the real-sector has led to a rise in indiscriminate investment, increased half-built and abandoned sites which are causing a rise in water pollution, dust pollution and even dengue.

Pollution and Climate Change

Extreme climatic events and increased pollution are related to externalities that are threatening the sustainability of the Indian economy. The winter smog around the national capital Delhi significantly reduces the productivity of the city while putting residents under severe health risks. Lengthening of summer and unpredictability of monsoon is increasing water stress, as well as floods, which is putting households under stress and decreasing the overall national productivity.

To address these challenges, research-based and region-specific adaptation and mitigation investments will enable different regions to transform towards climate-resilient economic societies.

The government must invest in energy-efficient, global standard-compliant power plants to reduce smog around North India.

In addition, the government and private sector must invest significant capital in solar panel production, the infrastructure of EV automobiles, greener-sustainable materials, circular economy and responsible consumption. The green climate fund (GCF) has a specific mandate for adaptation finance for climate resilient agriculture and flood resilient infrastructure. The GCF is an interesting and evolving repository of knowledge which should help governments in designing and implementing climate mitigation and adaptation policies and investments.

Businesses around these emerging technologies are most likely to generate the next wave of job growth in the manufacturing sector.

In conclusion

Economic downturns are stressful times, but it is also said that “never let a crisis go to waste”. The downturns offer opportunities to re-write innovative policies as the public mandate is stronger for a change. India must use its current economic downturn as an opportunity to re-write public policies by incorporating elements of SDGs at each level of conception and decision and transform towards a greener, climate-sensitive and sustainable space. Sustainability at each level is the new competitive advantage and the emerging nations must capitalize it.

About the authors

Anirudh Agrawal is a doctoral fellow at CBS. His research interests are MSME finance, impact investing, social entrepreneurship and organizational 4.0. He is a chief strategy officer at Tvarit AI GmbH focusing on sustainable AI driven IT solutions and a visiting professor at Flame University India and formerly Assistant Professor at Jindal Global University.

Ashish Tyagi is currently a post-doctoral fellow and lecturer at Frankfurt School of Finance & Management. He completed his PhD from Penn State University. His research interests are environmental economics, climate change policies and sustainable transformation.

Photo by Sudha G Tilak

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.

Sustainability’s Infrastructure

Ethnographies of the global value chain of certified tea (SUSTEIN)

By Hannah Elliott, Martin Skrydstrup and Matthew Archer.

Why SUSTEIN?

Currently, the world’s tea industry is on a race with time to source tea sustainably before 2020. But what is “sustainable tea” and how do we know if tea is sustainable or not? This project entitled SUSTEIN (SUStainable TEa INfrastructure) will focus on this question by way of looking at localized translations of transnational sustainability standards in Kenya, United Arab Emirates and corporate headquarters in Europe. We aim to advance our understanding of the global value chain of certified tea.

3 Research lines

The theoretical objective is to venture beyond the notion of global value chain by reinterpreting sustainable supply chain management through the concept of infrastructure, a notion anthropologists and other social scientists have deployed in recent years to emphasize the political and temporal aspects of networks such as transnational supply chains. We hope that this concept will allow us to better comprehend how sustainable certification schemes manifest in global value chains.
SUSTEIN consists of three sub projects, which each address a core question posed by the project:

  • How does certification shape agrarian production in the form of cultivation and factory processing, and vice versa? Who benefits from which sustainability standards? (Line A)
  • How does certification influence the valuation of tea, assessed in terms of taste, grade and price? How is the value of certification performed and capitalized? (Line B)
  • How do corporate professionals and independent auditors distinguish between “sustainable/unsustainable”? What lines of evidence are recognized? (Line C)

Each of these questions will be answered by the corresponding research line:

tea plantation
Tea plantage in Kericho; one of SUSTEIN’s field sites.

Research line A

explores agrarian questions, enquiring into the ways contemporary drives towards sustainability shape and are shaped by modes of tea production in Kenya. The research focuses on the institution of the tea plantation and its associated factories and outgrower farms, all key components of the infrastructure of sustainable tea. The tea plantation has been described as having a “dual character” (Besky 2008: 1); it has its roots in British colonialism while being contemporarily positioned in international markets for certified sustainable commodities. This research line enquires into what ‘sustainability’ comes to mean and materialise within this apparently contradictory setting. How do contemporary measures seeking to ensure sustainable tea production, such as certified standards, affect the way tea is produced in the context of the plantation? And to what extent do longer-standing modes of plantation production endure through the present, in turn shaping contemporary sustainability ideologies and practices? The research line addresses these questions through ethnographic inquiry. The researcher will spend time with the people working on tea plantations and in factories certified by different certification bodies and on the farms of outgrowers contracted to supply the companies owning plantations with supplementary sustainable tea. Through interviews and participant observation, the ethnographer will enquire into the social, political and ethical worlds surrounding sustainable tea production in contemporary Kenya.

Research line B

will follow through on the plantation and factory sites to the auction sites in Mombasa and Dubai. Ethnographic fieldwork will be conducted in the Jebel Ali Free Zone in Dubai with no tax regulations, no strict labor laws nor import/export duties, making it the perfect infrastructural hub to blend and pack tea according to corporate logic. Likely as an outcome of this, the Dubai Tea Trading Centre has since its establishment in 2005 risen to re-export 60% of the world’s tea production. These volumes are predominantly traded on virtual platforms.
In contrast, the Mombasa Tea Auction holds two weekly auctions under the auspices of the East African Tea Trade Association (EATTA), which conforms to national regulations (Tea Act of Kenya & Tea Board of Kenya). Recently, this auction site voted “against the mouse and for the hammer,” maintaining the tradition of the Dutch auction style vs. virtual trading. The ethnography for this research line will move between these two sites, following tea blenders who purchase in Mombasa vs. Dubai and investigating tea expertise and technologies as it pertains to the valuation of certified tea.

Research line C

builds on these ethnographies of production and exchange to try and understand the relationship between corporations and standards/certification regimes. There is a tension between these groups of actors whereby standards organizations such as the Rainforest Alliance and Fairtrade International need to appear independent in order for their certifications to remain credible while at the same time remaining sensitive to the financial obligations of for-profit corporations in order to promote “buy-in.”
This research line will draw on interviews with people working in these organizations and participant observation at sites where they interact, including industry conferences and trade fairs. These are the sites where sustainability is negotiated as both a concept and as a set of practices. With that in mind, interview questions will focus on, among other things, the extent to which specific agricultural and trading practices are integrated into broader definitions of sustainability and their manifestation in different certification regimes, the challenges of maintaining a critical distance between certifiers and corporations, and the way standards govern markets and, crucially, vice versa.

The grant

SUSTEIN is made possible by the Sapere Aude Starting Grant (meaning “dare to know”), awarded by the Danish Council for Independent Research (DFF). The Sapere Aude program “is aimed at younger, very talented researchers, who at the time of the application deadline and within the last eight years have obtained their PhD”. The Sapere Aude program targets “top researchers who intend to gather a group of researchers, in order to carry out a research project at a high, international level.”

Reference

Besky, S. (2008) ‘Can a plantation be fair? Paradoxes and possibilities in Fair Trade Darjeeling tea certification’. Anthropology of Work, XXIX: 1, pp. 1-9.


Hannah Elliott is a post-doc in the Department of Management, Society, and Communication at Copenhagen Business School, having recently finished her PhD at the University of Copenhagen. She is responsible for research line A.

Martin Skrydstrup is an associate professor in the Department of Management, Society, and Communication at Copenhagen Business School and is the principal investigator of SUSTEIN. He is also responsible for research line B.

Matthew Archer is an assistant professor in the Department of Management, Society, and Communication at Copenhagen Business School and is responsible for research line C. He recently completed his PhD in environmental studies at Yale University and is interested in corporate sustainability and sustainable finance.


Closing remarks

In a year we hope to update BOS readers about how far we are with answering our research questions. In the meantime, we invite you to swing by our offices at Dalgas Have for a cup of tea.
The SUSTEIN project runs from 1 July 2018 to 30 June 2020.
For further information about the project, please contact the principal investigator, Martin Skrydstrup, at msk.msc@cbs.dk.

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.

The not-so-sharing economy

By Attila Marton

With the rise of Airbnb and Uber into the elite club of Silicon Valley superstar firms, the sharing economy has become an accepted business concept and social practice. Apart from the fact that sharing economy platforms (SEPs), such as Airbnb and Uber, are very savvy in playing labelling games (most of them have little to nothing to do with actual sharing), they are also very savvy in purposefully blurring established institutional boundaries and categories – most prominently, categories of employment and labour. By facilitating the “casual participation” of private individuals as users of their services, SEPs can gain significant advantages over well-established incumbents as they disrupt mature markets and labour structures as well as challenge long-held wisdoms of how to organize the creation and distribution of value.

It’s a thing now

The sharing economy is here to stay. Although, it is not yet clear whether the sharing economy will turn out to be as big a thing as the hype surrounding it suggests. Just to give some indicative numbers; The Economist estimates that the consumer peer-to-peer rental market is worth $26 billion, McKinsey predicts that the sharing economy will rise to $335 billion in revenues by 2025. In Denmark, 10% of the population has participated in the sharing economy in some form, while the Danish government announced a sharing economy strategy. At least it is safe to say that the hype is real and so are the expectations for high returns on the investments made into sharing economy platforms.

Something new, something old

The sharing economy, in its contemporary digitally platformed version, is the result of the confluence of three developments:

  • The rise of access-over-ownership as consumers are increasingly okay with paying for services and servitised products rather than to buy stuff. Streaming services, such as Netflix and Spotify, are telling examples. When we say access-based consumption or on-demand economy, we typically refer to this development.
  • The rise of peer-to-peer networks, which allow for direct inter- and transactions between peers coordinated by trust and reputation mechanisms. Think eBay and YouTube – typical examples of what we sometimes call the peer-to-peer economy or collaborative economy.
  • Allocating idle resources in order to tap into privately owned resources (assets and labour) and to promote more economical and sustainable use of resources as a result. Examples are IKEA’s second-hand campaign or renting out idle storage space via sharemystorage.com. Terms such as collaborative consumption and circular economy typically refer to this notion.

None of these developments is, of course, new nor exclusive to the sharing economy. Clans have been sharing food and tools since the dawn of humanity. Donating blood peer-to-peer has been around for at least half a century and the allocation of idle resources in brick-and-mortar second-hand shops even longer. The same applies to digital varieties of these practices; sharing files or selling/buying peer-to-peer online have been around since the 1990s (eBay was founded in 1995, Napster in 1999, Wikipedia in 2001). What is new is how these developments come together under specific technological, economic and cultural circumstances.

Mature technologies of automation enable private individuals to casually participate in economic activities as they self-service on dedicated platforms, which run automated matchmaking algorithms. Network effects attract larger groups of participants, increasing the economic value of those platforms (and of the corporations owning them). Thus, the coordination of casual participants has become a highly profitable business model. Culturally, these developments have become socially acceptable and appropriate as the new narrative of the Web 2.0 propagates “sharing is caring” and a general fascination with technological wizardry.

Four generic types of sharing economy platforms

An important outcome of above developments is that established institutional categories are becoming blurred, and static boundaries are becoming fluid. SEPs purposefully utilize these fluid boundaries to their advantage – be it between firms and markets (are Uber drivers employees or self-employed?), between internal and external resources (Airbnb hosts bring their own assets and have all the risks), and between private and business spheres (participants monetize and commodify their private life into assets), to name but only the most important examples. In our research (with Ioanna Constantiou, Dept. of Digitalization, CBS, and Virpi Tuunainen, Dept. of Information and Service Economy, Aalto University), we found that successful SEPs are very good at exploiting these boundary fluidity for their purposes. We identified four generic types we call the Franchiser, Chaperone, Principal, and Gardener.

  • The Franchiser aims for tight control over the platform participants and high rivalry among the service providers. The prototypical example is Uber, exploiting boundary fluidity by treating its drivers like employees while making them compete for fares dictated by Uber’s algorithm.
  • The Chaperone aims for loose control over the participants and high rivalry among the service providers. This is, of course, the Airbnb model; Airbnb exploits boundary fluidity by treating its participants like community members expected to follow norms and values while making the hosts compete like micro-entrepreneurs, who set their own prices based on Airbnb’s recommendation.
  • The Principal aims for tight control over the participants and low rivalry among the service providers. For instance, Handy (a per-task labour platform) treats its service providers like employees by making them sign contracts while the service providers participate in tenders based on standardized prices dictated by Handy.
  • Finally, the Gardener aims for loose control over the participants and low rivalry among the service providers. For instance, Couchsurfing (facilitating short-term, free-of-charge accommodation) leaves it to the participants to coordinate their accommodation while eliminating rivalry among the hosts by not allowing them to charge money.

Not so obvious implications

What each of these four types have in common is that they all rely on the casual participation of their user base; that is, their users typically operate on smaller scale, use their personal resources, and are less experienced than traditional service providers and professionals (not only in terms of delivering services but also protecting oneself against exploitative business practices).[1] Combined with digitalisation, such casualness provides unprecedented sources for creating value and disguises large portions of the labour of the participants.

It is the degree to which this hidden labour has become the core of the business models of Uber, Airbnb, Handy, and Couchsurfing, that is really new.

To name just two examples. By means of the app and data-driven algorithms, Uber obviously replaces taxi dispatchers. Not so obvious, however, is the hidden labour provided by the Uber riders who, by scoring their rides, control the service quality. This used to be the purview of employed and paid middle managers. Likewise, Airbnb does not only profit from on-boarding private individuals as hosts (instead of hiring professional concierges) but also from the marketing those hosts provide not just for themselves but for Airbnb, the corporation – hidden labour, which would have traditionally required to pay marketing specialists.

It is a not-so-sharing economy we are dealing with. In fact, the sharing economy is the quintessential expression of a new logic of capital accumulation in the digital economy, where large portions of labour are disguised as casual (or even pleasurable) participation in the name of self-servicing and sharing. These forms of hidden labour are not unintended consequences; they are essential parts of the platform business model, as they sustain the digital systems and algorithmic operations of those platforms in order to make “sharing” not only economically viable but, above all, profitable. As a result, the historically and culturally important institution of sharing (in the true sense of the word) is thinned out and replaced by the logic of the platform economy, the micro-entrepreneurial ethos of monetizing every aspect of one’s “everydayness”, and the precarity of depending on demand.


Attila Marton is Associate Professor at the Department of Digitalization at Copenhagen Business School. He  focuses the interplay between information management and digital memory studies and the question how we will remember and forget the past in the future.His research can also be found on Academia and ResearchGate.

Academic Reference

[1] See Katz, V. 2015. “Regulating the sharing economy,” Berkeley Technology Law Journal (30:385).

Photo by Fancycrave on Unsplash

 

Consider also our post from last week, dealing with the topic of sharing.

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.

Droned

by Glen Whelan.

A Military Heritage

A drone is an unmanned aircraft. Long used to refer to male honeybees – whose main function is to fertilize a receptive queen bee (and then die a seemingly horrific death) the word was first used to refer to remote-controlled aircraft by the US Navy back in the 1930s. The word was chosen as a homage to ‘the Queen Bee’, a remote-control aircraft that the Royal Navy demonstrated to the US Navy, and that inspired the US Navy to develop similar aircraft.

In the 1990s, the word drone was being used as a verb to describe the act of turning a piloted aircraft into an unpiloted one.[i] And by 2009, the word drone was being used to describe the act of remotely killing someone. As Fattima Bhutto wrote in 2009:

“Droned” is a verb we use now in Pakistan. It turns out, interestingly enough, that those US predator drones that have been killing Pakistani citizens almost weekly have been taking off from and landing within our own country. Secret airbases in Balochistan – what did we ever do before Google Earth? [ii]

Various Civilian Uses

With the development of consumer market autonomous drones[iii] that can be told to follow yourself or another person, it seems that the word ‘droned’, or ‘droning’, is soon to be used more regularly. Rather than just being used to describe acts of murder (or defense), however, it seems it will be used to refer to the act of being filmed or recorded by (autonomous) flying devices more generally.

Such filming will clearly be a good thing for legitimate film-making. And there are possibilities for autonomous drones to be used to improve accountability: as a form of sousveillance in response to surveillance by the powerful. But drones have other uses as well. Indeed, there are already numerous cases of drones being used for stalking around the world. Late last year for example, it was reported that:

“A group of women living in a rural setting near Port Lincoln on South Australia’s Eyre Peninsula have been woken at night by a drone looking into their home…. One of the women, who like the rest of the group did not want to be identified, was asleep and alone at home on her relatively remote hobby farm. She was woken by a bang on her bedroom window and when she looked out into the darkness was confronted by a camera attached to a drone, hovering within centimetres of her window”.

Technologically Changing Society

Whilst such reports are alarming, Nick Bilton[iv] has used a personal anecdote to suggest that the negatives of being droned could be overstated. As he writes:

“I was sitting in my home office, working on this very column about neighbours getting into arguments over drones, when I heard a strange buzzing sound outside. I looked up and hovering 20 feet (around 6 metres) from my window was a black drone with a beady-eyed camera pointed at me.

At first, I was upset and felt spied upon. But the more I thought about it, the more I came to the opposite conclusion. Maybe it’s because I’ve become inured to the reality of being monitored 24/7, whether it’s through surveillance cameras or Internet browsers. I see little difference between a drone hovering near my window, and someone standing across the street with a pair of binoculars. Both can peer into my office.”

Whether or not the majority of people would agree, or disagree, with Bilton’s sentiment, is well beyond the present piece. But what should be noted with regard to it, is that he seems to be correct to emphasize that droning will have a material impact on what we deem (un)acceptable. Thus, as more and more people get droned – and as the capacity to make more sophisticated autonomous drones gathers pace – we should expect social norms and practices regarding privacy and personal (air) space to change as well.


Glen Whelan teaches at McGill, is a Visiting Scholar at York University’s Schulich School of Business, and the social media editor for the Journal of Business Ethics. He was GRB Fellow at CBS in 2016/2017.  His research focuses on the moral and political influence of corporations, and high-tech corporations in particular. He is on twitter @grwhelan.

Links

[i] Zimmmer, B. 2013. The flight of ‘drone’ from bees to planes. The Wall Street Journal, July 26. https://www.wsj.com/articles/SB10001424127887324110404578625803736954968

[ii] Bhutto, F. 2009. Missing you already. New Statesman, March 12. https://www.newstatesman.com/asia/2009/03/pakistan-war-government-terror

[iii] https://www.skydio.com

[iv] Bilton, N. 2016. When your neighbor’s drone pays an unwelome visit. The New York Times, January 27. https://www.nytimes.com/2016/01/28/style/neighbors-drones-invade-privacy.html

Pic by Cambodia, P.I. Networt, Flickr. No changes made.

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.

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.

 

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.

Business and Open Government / Open Data – An Advocacy Role for Business?

By Dieter Zinnbauer.

  • There is a much needed conversation on what stronger role business could and should take in the realm of open data
  • If business decides to put its powerful voice behind efforts to open up government data everyone could win
  •  More effective accountability and democratic empowerment via open government/open data would make a lasting contribution to the common good, put corporate political engagement to work and reaffirm the readiness of business to live up to its role as good corporate citizen

Approximate reading time: 4-5 minutes.

Two worlds apart?
Big excitement in the corporate world about big data is mirrored by big excitement in the NGO world about open data, the nearly world-wide move towards making data held by governments and the public sector more broadly available and usable. Big data is often described as the new oil, an essential commodity powering the economies of the near future. Quite similarly open data / and open government are celebrated as the new oil to lubricate and fuel democratic participation and accountability.

At first sight it looks like these two types of data-related euphoria should really complement each other and make business an enthusiastic proponent of open data. Yet, there still seems to be quite a substantial disconnect between these two spheres. The corporate world is primarily thinking about data in proprietary terms. The more exclusive, the more lucrative this asset class is going to be. The NGO world in contrast frames open data as a public good opportunity. The more freely available the more valuable it is – socially and politically. These contrasting world views are arguably one of the main reasons why interest by business to actively engage in the open government, open data movement appears to be rather tepid. At the same time, efforts by civil society to actively reach out to and proactively engage business are perhaps also not as enthusiastic or systematic as they could be.

Yet, I would suggest, that this narrative of an intrinsic antagonism between the business and open views of the new data era is a rather false and counter-productive one. It masks how interwoven both domains actually are, delays a much needed conversation on what stronger role business could and should take in the realm of open data.

Multiple inter-linkages
So here just a set of observations to help soften and shake up this rigid narrative and to provide a flavor of the things to come with regard to the potential engagement of business on open data issues.

  1. Public data has long been an important raw material for business. Commercial information brokers that build on, make more accessible and add further value to publicly available data have a long tradition (think phone books). And even in the early digital days before the enormous scale, scope and potential of open data had even appeared on the horizon the empirical picture was astounding: assessments for Europe, for example, put the overall commercial value of public sector information as input to economic activity at an amazing EUR 200 billion or 1.7% of total GDP fur the EU 27 (Vickery 2011).
  2. Businesses have been early protagonists in the open data world. It is rarely explicitly appreciated that business also has a very active history of pushing open data boundaries. As it turns out it was companies that pioneered some of the food labeling and related data initiatives that helped establish new expectations and regulatory standards about what types of data should be collected and made openly available for food items, since consumer trust was essential for rapidly industrializing food industries and a competitive advantage could be gained by first movers on that front. (Schudson 2015).
  3. Business are major users of open government mechanisms. It is companies –not journalist or citizen groups – that are by far the main user of freedom of information requests to help push more government held information into the open in the US (Kwoka 2016) – and turned these data trawls into lucrative trading opportunities (Gargano et al. 2016).

Where could this go next?
All this bodes well for business to take a much stronger interest in and help advance the open data/open government agenda.

What could be priority areas for such an engagement that are both critical to the open government idea and also provide some tangible benefits to business? Here just two examples:

  • Open contracting and open procurement: two groups of information that are central planks of many open data/open government reforms and that can help provide a level playing field for market access, push out unfair collusion rackets and more broadly provide a much broader set of valuable market intelligence when interacting with and devising bids for government clients, something that can be of particular importance when operating outside the home market;
  • Data on beneficial ownership of companies/property/land, as well as disclosure of assets/income/interests by senior government officials: a major push is underway by open government advocates to press for more data collection and public disclosure in these two areas, which are also essential for companies and what is often very resource-intensive due diligence/compliance in vetting new clients, identify conflicts of interest, guard against self-dealing etc.

If business decides to put its powerful voice behind such efforts to open up government data everyone could win. First such a corporate commitment would amount to a step change in the momentum for deepening such initiatives and expanding them to more countries, now that the lower-hanging fruits have been picked. Secondly, it would provide opportunities for business to lower costs for market intelligence, risk-management and compliance, while yielding indirect benefits in terms of fairer competition and lower entry thresholds. Third, the opening of these new data troves makes it possible to build new business models that curate, re-combine and apply advanced analytics to these datasets and offer related information services. This in turn would help to mitigate the chicken and egg problem for open public data ecologies where public authorities are hesitant to commit over a longer horizon and invest steadily in open data as long as they cannot see widespread use, while companies are reluctant to invest in the use of these data sources as long as they do not expect reliable maintenance and sustainable upkeep (Jetzek 2017). Finally, a stronger business commitment to supporting the open government / open data movement and the concomitant impact on more effective accountability and democratic empowerment would make a lasting contribution to the common good, put corporate political engagement to work for both company as well as societal interests and reaffirm the readiness of business to live up to its role as good corporate citizen.

What do you think?
So how to deepen this engagement? A good starting point is to unpack in a bit more detail where interests most strongly overlap, which types of open government and open data are most interesting for business. Any insights? What types of open data do you think are most useful for business? What is your company already doing in this area? I would love to hear your view on this, particularly if you are from the business world. You can take this 5min survey  to share your opinion – and I will report back on aggregate findings in a later post.


Dieter Zinnbauer works on emerging policy issues and innovation for Transparency International (TI) and is a current research fellow at the Governing Responsible Business Research Environment, CBS. He has held various post-doctorate research fellow positions on technology, governance and development issues. Prior to joining TI Dieter worked for more than 10 years in Asia, Africa, North America and Europe as policy analyst and research manager for a variety of organizations in the field of development, democratization and ICT policy, including with UNDP, UNDESA, and the European Commission.

Follow him on Twitter.

Pic by Jenny Downing, edited by BOS.

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.

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.

The Dark Side of Transparency

By Lars Thøger Christensen.

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

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

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

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

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

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

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

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

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


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

Pics by Roland Molnár and I Want a Poster, Flickr

CSR in Asia – A Learner’s Reflections

By Jeremy Moon.

One of the most exciting features of my CSR adventures has been Asia.  As a result of opportunities to travel, meet and engage with Asian academics and practitioners, I have been able to ponder, write and edit research on CSR in Asia for over a decade. However, I still think of myself as a learner. I don’t live in Asia and I don’t know any Asian languages – unless we count English! 

Moreover, Asia is so large and diverse that acquaintance with one country may give little guidance to how things work in others. Scholars are relatively at ease in generalizing about national approaches in the USA and Europe (probably wrongly, but that’s another story!). In Asia this can be tricky as many countries have diverse business systems (see Witt and Redding eds. 2014).  Nonetheless, Asian countries, no less than any other, do acquire national business systems and thus national studies, with appropriate cautions, are none the less valuable. My paper with Wendy Chapple on the subject (Chapple and Moon 2005) has proved a reference point for other interested scholars. Doubtless it has irritated others who would point, for example, to the diversity of business systems in, say, India, predicated on issues of culture, religion, politics, law and economic development.

We need to address the gap to non-normative theorization of CSR in Asia research

Undeterred I have pursued my appetite for CSR in Asia, most recently with Rebecca Chunghee Kim (Kim and Moon 2015). We investigated the place of CSR in Asian business and management research. Our finding was of a growth of the proportion of publications on Asian topics in the leading CSR journals, and of a growth in the proportion of publications on CSR topics in leading Asian business and management journals between 2000 and 2014. The papers we studied were overwhelmingly empirical rather than theoretical, and the empirics were increasingly of a quantitative rather than of a qualitative nature. It is to be hoped that this imbalance will be redressed particularly by greater attention to non-normative theorization of CSR in Asia research.

Whilst the growth of publications was manifest across all three geographical regions we distinguish (East Asia, South East Asia and South Asia), it was particularly strong in East Asia – largely explained by research on China. This is interesting as in our first analysis of company self-reporting of CSR in Asia conducted in 2002 – 2003 (Moon and Chapple 2005), China did not feature as we did not have a sufficient sample of Chinese companies self-reporting their CSR.

Regulation by norms dominates Asian CSR

CSR in the West has taken a new institutional turn with a shift from an emphasis to ethical norms and philanthropy to include a variety of new organizations (e.g. partnerships, multi-stakeholder initiatives) and regulations (e.g. soft rules of international standards and government reporting regulations). So Rebecca and I investigated what impact these had in CSR in Asia research? Interestingly about 40% of publications we studied had some sort of reference to institutionalization. Whilst this seems like a fairly predictable score, curiously, there was virtually no attention to the institutionalization of CSR in Asia through ‘organization’, and almost all the research focused on the institutionalization of CSR through ‘regulation’.

We investigated these papers further by distinguishing those that focused on regulation by ‘norms’, ‘soft rules’ and ‘mandate’, and whether these regulations were ‘situated’ (i.e. located in specific communities or places) or ‘universal’ (i.e. based on abstractions e.g. human rights;  or international frameworks e.g. the United Nations Global Compact).  Whilst there was some attention to ‘soft rules’ (e.g. the ISO 26000) and ‘mandate’ (e.g. the Indian CSR Act), the finding was of an overwhelming stress on ‘norms’.  The orientation of these norms and other forms of regulation, was almost entirely ‘situated’ rather than universal.

Community as No.1 stakeholder demands ‘the right thing to do’

In this light, our analysis turned to the place of community in Asian CSR.  Our review suggested that this is the No.1 stakeholder in Asian CSR, and this centrality is framed primarily in ethical terms. This ethical character is often expressed with reference to long-standing religious and other cultural conceptualisations of ‘the right thing to do’. It contrasts with the greater stress on the range of ‘primary’ company stakeholders in stakeholder approaches to CSR in the West, including employees, investors and consumers, as well as communities. Here there is greater emphasis on functional motivations for these relationships, notwithstanding Ed Freeman’s own stress on ethical and strategic reasons for managing for stakeholders (e.g. Freeman, Harrison and Wicks 2007).

The way forward

Among the questions that arise is the durability of these community orientations in the context of the increasing internationalization of business. Can Asian companies retain these grass-roots orientations as their value chains grow? Will there be a bi-furcation of CSR in Asia between its domestic relations, institutionalized by the ethics of community, and its international relations institutionalized by CSR organizations and regulation by soft law and mandate? Will CSR in Asia take on a more organizational form? How will Asian and Western forms of CSR interact in the future?


Jeremy Moon is Professor and Velux Professor in Corporate Sustainability at the Department of Intercultural Communication and Management at Copenhagen Business School. His primary research areas are corporate social responsibility, corporate sustainability, corporate citizenship, corporations and governance and business and politics.

Photo: allthefreestock