CSRHub Blog Research on ESG metrics and comments on sustainability best practice

By: Carol Pierson Holding

In his op-ed piece “Two Cheers for Capitalism,” conservative columnist David Brooks quotes fellow New York Times writer Anand Giridharadas about why capitalism isn’t working:

“The rich are to be praised for the good they do with their philanthropy, but they are never to be challenged for the harm they do in their businesses. … Sometimes I wonder whether these various forms of giving back have become to our era what the papal indulgence was to the Middle Ages: a relatively inexpensive way of getting oneself seemingly on the right side of justice, without having to alter the fundamentals of one’s life.”

I wonder why Brooks considers this statement “courageous” and “provocative” rather than stating the obvious.

Indeed, in 2014, World Bank Economist Apurva Sanghi made the same argument for business and its own form of Papal indulgence: “CSR (corporate social responsibility) is about companies ‘giving back’ … How can companies that produce products that are polluting the environment have a strong reputation for social and environmental responsibility?’”

Sanghi slams some CSR as just another form of the “’guilt complex’ - charity as a means of managing a potential backlash.” And surely that happens, as he points out, with oil companies and big tobacco. But when a company makes an operational decision that’s good for society, you can bet it’s also good for the business.

And when businesses band together with competitors to address a societal ill, it’s because the very heart of capitalism is threatened, as it is with climate change.

Will capitalists step up to climate change for their own survival?

The evidence seems to say yes.

We’ve all heard about climate-caused business disruptions – think Hurricane Sandy in New York and rising sea levels along the East Coast. But climate change affects both  operations and consumer confidence.

The latest Yale/Gallup/Clearvision poll found 62% of Americans are convinced that “global warming is an urgent threat requiring immediate and drastic action,” indicating widespread fear.

Recall the stock market crash of 2008: when consumers are afraid, they don’t buy products and they don’t invest. As the impact of climate change gets worse, consumers may just stop spending. As temperature extremes worsen, they might just stay home.

And consumers are rewarding climate friendly companies by buying their products and their stocks.

The rest of business is jumping into action too.

Just a few days ago, the Huffington Post reported that eleven environmentally responsible corporations including Bank of America, Goldman Sachs, Walmart, and Apple joined Obama in "American Business Act on Climate Pledge." The purpose of the climate pledge? To support a "strong outcome" at the climate negotiations in Paris and commit to renewable energy, emissions reduction, responsible water use and halting deforestation.

Last year, even without the President’s backing, over 100 companies joined a coalition called We Mean Business to advocate bold action on climate change. Those companies were already climate leaders in their products (think electric cars and green investment funds) and operations.

We Mean Business now represents $2.19 trillion in members’ revenue and $7.4 trillion of investment.

Capitalism as practiced in 2015 America is a flawed system, distorted by years of legislation removing essential safeguards. But when it comes to climate change, capitalism might just be the most effective solution. Regardless of how weak you believe the connection is between profit and social responsibility, the connection between profit and public opinion has never been stronger.

Add to that the economic opportunities presented in the course of addressing climate change in both operations and consumer loyalty — opportunities such as Ikea discovering a solar gold mine in its massive flat roofs and the UK’s Marks & Spencer’s impressive gains in reducing carbon emissions while successfully relaunching its brand as the sustainable retailer — and you’re seeing capitalism at its finest.

Photo courtesy of Alessio via Flickr CC

Carol Pierson Holding is President and Founder, Holding Associates. Carol serves as Guest Blogger for CSRHub. Her firm has focused on the intersection of brand and social responsibility, working with Cisco Systems, Wilmington Trust, Bankrate.com, the US EPA, Yale University’s School of Environmental Sciences, and various non-profits. Before founding Holding Associates, Carol worked in executive management positions at Siegel & Gale, McCann Erickson, and Citibank. She is a Board Member of AMREF (African Medical and Research Foundation). Carol received her AB from Smith College and her MBA from Harvard University.

CSRHub provides access to corporate social responsibility and sustainability ratings and information on 15,000+ companies from 135 industries in 130 countries. Managers, researchers and activists use CSRHub to benchmark company performance, learn how stakeholders evaluate company CSR practices and seek ways to change the world.

By Carol Pierson Holding

Like many people, my faith in capitalism was badly shaken by the crash of 2008 and its aftermath. I sat by, appalled as some capitalists denied climate change and used the economy as an excuse to continue their planet-destroying practices.

I rooted for regulation, until Obama, who once seemed to be the environmentalist’s last great hope, declared his second term energy policy would be “all of the above.”

Given this lack of resolve, I was surprised to read in last week’s environmental website Sightline’s that US oil consumption is actually falling:

US Energy Information Administration suggests that total oil consumption in the United States fell by about 1.5 percent last year — meaning that the country as a whole used about as much oil in 2012 as it did in 1994… (even as) population grew 19%.

How can this be?  Since the comparison goes back to 1994, we can’t credit the recession. The large bulk of oil consumption is from transportation, and as laid out in painful detail in SmartPlanet, the drop is not due to greater vehicle efficiency. So what is driving this drop?

The timing suggests the drop is price-related: per capita oil consumption has fallen most dramatically since 2004, when oil prices started rising sharply.

To the planet’s everlasting gratitude, higher oil prices lasted long enough this time to launch a revolution in transportation. Think about what’s happened just over the last few months:

• Car-sharing moved into the mainstream. Avis, which leads the industry in CSRHub’s social responsibility ratings, paid $500 million for the largest car-sharing company, Zipcar.
• United Airlines completed its first all biofuel jet flight. The company subsequently placed an order large enough for biofuel companies to scale to cost effective levels.
• The Department of Defense, the world’s largest consumer of energy consuming $17 billion of fuel in 2011, is courting Cleantech venture capitalists. Washington’s Clean Technology Alliance hosted a conference last week in Seattle that featured Robert Gates, former Secretary of Defense and Sharon Burke, Assistant Secretary of Defense for Operational Energy. Why are these heavyweights giving their time to a Cleantech meeting? Price instability puts its budget at risk; far worse, having to move oil in battle zones creates human risk. Solar-powered mortar pits were Burke’s exemplar, formerly fueled by highly dangerous helicopter missions.
• Most exciting, the driverless car is road-ready. As described in Chunka Mui’s outstanding series for Forbes Magazine, this innovation could save 1.9 billion gallons of gas/year and their resulting emissions in the US alone, at a cost to consumers that is somewhat less on average than owning and operating a car. The technology has been road tested by Google for 300,000 miles as well as several car manufacturers and is looking for a market.

And U.S. consumer acceptance is “closer than you think,” according to Mui, who sites the younger generation’s comfort with technology and population segments such as the elderly and the disabled who are unable to drive themselves. The early forces that held back air travel – fear of crashes – are also selling points for the driverless car, which promises to reduce accidents by 90%.

These examples are democratic capitalism at its finest. After 50 years back-and-forth on conservation and environmentalism, gas prices creep out of America’s comfort zone and national public opinion shifts. Over the next few years, investors get serious. Bedrocks of conservatism like the DOD, the airline industry and car-makers find the will to act.

Climate change has found a potentially scenario-changing champion in capitalism.

Am I just the relentless optimist to think that capitalism can save us? I’m all for increased regulation of the capitalist money machine to control unfettered greed. But here is the free market system at its best. Makes you want to believe again, doesn’t it?

Photo is courtesy of griffithchris via Flickr CC

By Carol Pierson Holding

Harvard Business Review’s cover story this month, “Creating Shared Value,” should be a celebration of how far CSR (Corporate Social Responsibility) has taken us. Just look at how much closer we are to accepting CSR as a core competitive strategy. As fans of authors Michael Porter and Mark Kramer know, these two have been proponents of CSR for years, pushing the field forward with new ideas like “Strategic Philanthropy” and now, “Shared Value.” Most impressive about their latest article is its place on the cover of this conservative business journal.

Two years after Harvard Business School ran an alumni conference on the future of capitalism (which eerily coincided with Lehman’s collapse and market’s 900+ point drop), that institution’s journal leads with this article, subtitled “How to reinvent capitalism — and unleash a wave of innovation and growth.” Finally, the argument about whether CSR is key to our future or just window dressing seems to be put to rest.

I applaud the authors. But why, aside from promoting their consulting business, would they insist that CSR is discredited and should be replaced by Shared Value? They misstate CSR’s mission as “doing good” when in fact it is “doing well by doing good,” which is the same as their concept of Shared Value. In fact, until recently, they were huge supporters of CSR. In their 2006 article, “Strategy and Society: The Link Between Competitive Strategy and Corporate Social Responsibility,” they pointed out flaws in CSR but weighed in heavily in its support.

Whether you call it Shared Value, CSR, ESG, or Corporate Citizenship, or Sustainability, or Corporate Responsibility, or Triple Bottom Line or any of the other terms people use, we are all pushing the same agenda—to do well by doing good. And the term “CSR” is well known and accepted in business.

It has been written about extensively in the business press. Most controversially, it has appeared twice on the cover of The Economist. First, to dismiss it per Milton Friedman’s “The business of business is business,” then a second time, in support of the concept. CSR has a set of metrics in place through the 20+ year old SRI ratings, a self-reporting structure in GRI, and a requirement in many companies’ RFP’s for a CSR report. Insurance, risk assessment, accounting bodies including FASB and many other industries and institutions all have “CSR” or “Sustainability” efforts underway. Porter/Kramer do a great service in lifting the issue to the front page of business, but why would we want to abandon all the progress made under the CSR rubric?

With CSR finally accepted as a core business strategy, Porter/Kramer now jump into the fray not with ideas of how to move more companies into the “Doing well to do good” camp, but with arguments about why their new name and model is better than CSR. Worse, even though they have several branding pros on the staff of their consulting firm, they dismiss the value of communications in support of CSR as mere promotion, ignoring the importance of communication in changing consumer behavior. Many of the companies Porter/Kramer cite as examples of Shared Value have used their brand to change consumer behavior for the better (think ads and promotion for GE Energy Smart CFL light bulbs). Yet Porter/Kramer fail to mention this.

Watching TV last week, I came across a great example of CSR communications’ power to increase sales while saving the planet.  The EPA confirms that in many cities, “The personal automobile is the single greatest polluter.” A key component to reducing these emissions will be the Electric Vehicle. Current ads for the Chevy Volt, the leading American-made Electric Vehicle (EV), are clearly good for Chevy’s brand reputation. But dismissing the ads as mere promotion misses the more important story: the advertising reduces fear of the EV by showing how easy it is to recharge, thereby persuading more consumers to buy EVs.  If this is CSR, I’ll take it over Shared Value any day.

Carol Pierson Holding is a writer and an environmentalist; her articles on CSR can be found on her website at  http://www.holding.com/Index%20links/articles.html.