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

Ikea’s announcement that it would sell solar panel solutions in its UK stores was startling for any number of reasons. Ikea may be a leader in renewable energy for its own operations, with over half a million solar panels installed on its store and factory roofs and a fleet of its own wind turbines. But solar power for its customers?

From a business perspective, it makes little sense. Margins on solar panels are very thin, especially at Ikea’s prices. And this year, with China suppliers awash in panel inventory, wholesale panel prices have been extraordinarily low.

Ikea’s one year pilot project at its Lakeside UK store near London sold “one photovoltaic (PV) system almost every day.” They’re not running out the door, despite generous government incentives in the UK.

PV systems require a new business model for Ikea, requiring installation and maintenance services. Ikea’s panel supplier is Hanergy Holding Group Ltd, a privately-held Chinese company whose panels may be subject to “quality, environmental, after- sale service and product warranty concerns.” One wonders how quickly other franchise owners will take on the reputational risk of the solar panel business.

If Ikea decides to roll out its solar panel program in the U.S., it will face competition from stores experienced in home installations such as Lowes and Home Depot, which has been advertising and installing solar panels since 2005 through its partnership with BP.

There are plenty of potential problems with Ikea’s solar panel business. But from a branding perspective, it makes total sense. As early as 2003, culture watchers, environmentalists and even designers have found fault with the underlying ethic of Ikea’s approach. In a short piece on ethics in graphic design, Ikea is charged with designing its products with planned obsolescence in mind. In 2009, Salon reviewed Cheap: The High Cost of Discount Culture, Ellen Ruppel Shell’s criticism of our cycle of consumption that is destroying the environment and harming labor as well. Focused on discount chains like Wal-Mart and Target, Shell “gently damns” Ikea for its cheap, disposable products that are as bad for the environment as Wal-Mart’s. The environmental blog along the trail aptly called Ikea “consumerism on steroids.”

[csrhubwidget company="IKEA-group" size="650x100" hash="c9c0f7"]

A recent glance at Ikea’s U.S. consumer web site reinforces this idea: most of the site’s new offerings are doo-dads and children’s toys.

Now, with its solar offerings, negative impressions associated with Ikea’s disposable “stuff” could be tempered by solar panels in the stores. The company’s 2012 Yearly Summary launched its campaign of “People & Planet Positive.” But the greenwashing of the last two decades has put consumers on alert to eco claims that are mere promotion. Ikea’s success with solar panels to generate energy for its own use has been much ballyhooed. Solar for consumers is its next big chance to reinforce its good guy mantle.

Not a moment too soon. A new study by BBMG, GlobeScan and SustainAbility found that—

“…the sustainability proposition has changed from being the ‘right thing to do’ to being the ‘cool thing to do’.  …For decades, green marketers have been speaking to the wrong consumers, assuming that by engaging the most committed ‘advocates’ we would create significant business growth, cultural relevance and change at scale. What makes Aspirationals so compelling is that they combine an authentic commitment to sustainability with a love of shopping, design and social status, aligning economic, cultural and social forces to shift the way we shop.”

For consumers, Ikea’s long-admired design sensibility is intertwined with its sustainability. The chain’s commitment to affordability doesn’t have to fight with perceptions of sustainability. But Ikea must tread very carefully to preserve all three. A potential money-loser like solar panels could boost its environmental reputation and enhance its brand’s coolness. After all, the announcement about its UK stores carrying solar panels was carried widely across U.S. consumer, environmental and business media. So far, it looks like a branding home run.

Photo courtesy of lydia_shiningbrightly via Flickr CC.

Carol Pierson Holding writes on environmental issues and social responsibility for policy and news publications, including the Carnegie Council's Policy Innovations, Harvard Business Review, San Francisco Chronicle, India Time, The Huffington Post and many other web sites. Her articles on corporate social responsibility can be found on CSRHub.com, a website that provides sustainability ratings data on 8,300+ companies worldwide. Carol holds degrees from Smith College and Harvard University.

CSRHub provides access to corporate social responsibility and sustainability ratings and information on 8,300+ companies from 135 industries in 104 countries. By aggregating and normalizing the information from 270+ data sources, CSRHub has created a broad, consistent rating system and a searchable database that links millions of rating elements back to their source. Managers, researchers and activists use CSRHub to benchmark company performance, learn how stakeholders evaluate company CSR practices and seek ways to change the world.