Avid readers will notice that co-incidentally, we've published a couple of pieces promoting the views of Bennett Freeman, senior vice president of policy and research at Calvert recently.
I'm posting about them on here because Bennett is in an excellent position to comment on the above topics, working as he does for the biggest bespoke ethical investor in the US, Calvert.
Here's an extendend Q&A and a lengthy podcast you ought to find useful if you are interested in the cutting edge of the US corporate responsibility agenda (indeed the global agenda):
Investors, heavy industry and human rights in 2010: Has the responsibility agenda made a difference?
Bennett Freeman of Calvert answers questions from Rob Foulkes on investor engagement with big companies, and discusses progress made on business and human rights in general, and specifically John Ruggie’s work, Equatorial Guinea, the Extractive Industries Transparency Initiative and the Voluntary Principles on Security and Human Rights
AND:
The state of SRI in the US, climate politics and predictions, and Google in China
Toby Webb speaks with Bennett Freeman, senior vice president of sustainability research and policy at Calvert Investments, the largest individual US socially responsible investment firm, about US politics, climate change, Google in China, and the state of the SRI market in 2010.
Monday, April 26, 2010
The failings of stakeholder engagement, five suggestions for managers
It's report time again and our mail box at Ethical Corporation is starting to flood with press releases and PDF reports from companies, their PR firms and consultants.
The good news is that corporate responsibility reporting is improving all the time.
The smarter firms are starting to understand that a PDF report, even with some stakeholder voices in it, plus a press release, a website and hard copy mailing with a letter just does not cut it any more.
That's why our reporting conference late last year was sub-titled 'no-one reads your report, so what are you going to do now?' as is a session at our big annual jamboree conference, the Responsible Business Summit, coming up on May 4-5 (with awards this year).
So reporting, which now at best, includes blogs, third party related reports, stakeholder panels, online debates, real-time corporate sites, NGO endorsements, twitter, facebook and so on in the social media space, is evolving much faster than in the past. But there's a problem with who reads them, as we all know.
This will change over time, just not as quickly as many of us would like.
That aside, stakeholder engagement is at least, if not more tricky to get right.
Engagement is still an incredibly hard job to do well. Many external stakeholders know little about your business, or only care about a particular issue.
Hardest of all to engage, perhaps, are that mythical group, often profiled by expensive PR firms as 'opinion formers'.
Sound impressive don't they? That is until you realise they usually comprise anyone in the media, NGOs, governments, academics, and think tanks (did I miss a group?) who might talk to companies and who happens to be on a PR or internal communications database. People like me.
I get perhaps a letter a week sometimes (how quaint) and several emails in the same time period, approximately, informing me that I am such a person and so could company X or Y (via their PR or market research firm, or if lucky, CR consultant) 'engage' me in some way.
Some go as far to say that I have been 'carefully selected' to engage with them. What a privilege, to be chosen from thousands to give up time to a stranger. That's often how it comes across. Not so warm.
I do tend to feel a bit of a fraud to be named as such. After all, Ethical Corporation reaches numbers in the low tens of thousands on the web and in print (I wish they were all print!) and most CEOs, even communications directors do not know us (the engaged ones do :).
I used to spend a lot of time engaging in the typical telephone calls/online surveys. The pitch is almost always that a donation will be made to charity. Occasionally one is offered a look at the summary of stakeholder comments.
There's a few problems with this approach. Here's why I now say no to being engaged this way:
1) Several times, I had to chase companies (or their agents, more often) to actually make the donations promised after the NGOs contacted me (I donate to small ones who keep track) to say nothing had arrived. I'm sure this was due to cock-up over conspiracy, but still, it left a sour taste.
2) The times I was sent a 'summary' of stakeholder views, almost all of the critical comments seemed to have been removed, or only the mildly challenging ones, plus the nice ones, were left in. So they had extremely limited value, if any.
3) When and if, follow up happens the next year, little reference is made to the previous process. No transparency is provided on who else is engaged, why, and the results of the engagement in terms of how they affected the report, or corporate strategy. In short: As a stakeholder, you can't see what impact your input had.
So you feel a little like Bill Murray's character in the film 'Groundhog Day', repeating the same conversations again and again.
(These are usually: Why do you have no credible stakeholder voices in your report, how are they involved in the process, do they have any impact on business strategy, and if not, why not)
Don't get me wrong here: I'm not saying all stakeholder engagement HAS to have an impact on your strategy. It can't all the time, or you'd be bust. 'Apply or explain' is a good rule here.
4) Most importantly, trying to run a small business (or anyway), I am time-poor, and I don't know that much about some of the companies that ask me to engage with them.
I tend to like to do a bit of research on firms before I form a view so I feel a bit fraudulent offering an opinion when I don't have much time at all to look them up, do some reading, canvass opinion and form my own view.
That aside, stakeholder engagement with opinion formers is possible, of course.
So how can you best engage so called 'opinion formers' in the contents of your report to best effect?
Here's a few thoughts:
A) Provide a reason to engage in more than cursory detail
Rather than have a PR firm or research firm contact your desired stakeholder group, why not a personalised email from a senior executive instead? The technology is there, they don't even have to write or send it. But doing it this way makes your stakeholder feel more important, less like being an anonymous part of a process.
B) Do something different, have a big idea
Don't use vague terms, like 'start a dialogue with you'. As stakeholder we don't know what that means. Why not say, 'we'd like to know what you think of us, and we'll tell you what others think too, unvarnished'.
More importantly, understand that a telephone or online survery just doesn't cut it. Sure it will get your some quantitative data, but from disinterested folks who know little about your business and are likey, in most cases, to be going through the motions to get off the phone or finish their online survey. So what does cut it?
Well, a focus group with interesting peers, like those the consultancy Context regularly host. With a good lunch, stimulating conversation and networking, the stakeholder also gains, not just the company.
How about a breakfast seminar/roundtable? We've done these with PepsiCo UK. Invitation only discussion, again with peers and interesting people. NGOs, academics, think tanks, other companies, government folks. These really work, and can be written up. Here's an example, and here's the slides.
Thirdly, how about making that online survey into an online debate? We've done this with Vodafone, and it was fascinating. Hundreds of people engaged, Vodafone gained comments they would not have otherwise, and we all learned something.
C) Make that idea interesting, and deliver it well
Don't make the engagement about YOU. Otherwise you come across as the pub bore. No-one likes the person who acts thus: "Well, that's fascinating, but let's talk about me...".
Make it about the issues. With Pepsi, we made it about water issues. With Vodafone, about how the low carbon agenda presents an opportunity for technology companies.
That's far more interesting than saying "let's go over our health and safety stats in the report". If you want to do focused engagement on your report, then pick a topic to major on, don't make it the whole thing, it won't work well if you do.
This point also refers to having a good moderator and facilitator. Simon Propper at Context makes his focus groups work because he's great at engaging people and getting them to relax and speak their minds. Some people are not. I've been to some really painful focus groups where the lead consultant, or corporate bod, just didn't have the skills.
D) Communicate it hard
This is key. Many many companies, particularly the CR departments, are frankly, crap at communications. Their communications are often haphazard, random, and poorly planned. I should acknowledge at this point that communications are of course, hard to do well.
But it's worth really thinking through how you communicate the outcomes of your engagement.
My view is a short 6-8-10 page PDF briefing, well designed and written by an external writer, is the best way. Easy to do, and easy for people to pass on. Of course you can and should use the comments for your reporting, but no-one really reads that, as we know.
E) Show some outcomes from it, a month, three months, a year on, continue your work...
The following year, or quarter, use what what discussed last time, in whatever format, to inform the new area of engagement/debate.
That way you create a series of stakeholder engagement briefings, and you can talk about what you have done a result. Of course these go in your report, but if a series of briefings refer back to each other, then over time, you've created some valuable documents which chart both your course, and the views of the participants, on fast-moving topics.
The point of this post is to argue that your corporate responsibility outcomes are in many ways dependent on your inputs, as with many business processes.
So if your inputs are often poor (as many stakeholder engagement processes currently are) what chance do you have of decent outputs that can affect business strategy?
It's very true that engagement is an evolving art, not a science.
But in between the macro model of surveys and questionnaires and the micro model of comments on your website and corporate CSR blog, lies a valuable hybrid model of focus groups, seminars, focused online and offline debates and virally-spread issue briefs that in my view, companies should spend a lot more time and money on than many currently do.
Give it a try, spend 5 or 10 K less on your CR report and invest 5-10K on one of the above, or two of them, see how it goes for you.
You won't know unless you give it a go.
The good news is that corporate responsibility reporting is improving all the time.
The smarter firms are starting to understand that a PDF report, even with some stakeholder voices in it, plus a press release, a website and hard copy mailing with a letter just does not cut it any more.
That's why our reporting conference late last year was sub-titled 'no-one reads your report, so what are you going to do now?' as is a session at our big annual jamboree conference, the Responsible Business Summit, coming up on May 4-5 (with awards this year).
So reporting, which now at best, includes blogs, third party related reports, stakeholder panels, online debates, real-time corporate sites, NGO endorsements, twitter, facebook and so on in the social media space, is evolving much faster than in the past. But there's a problem with who reads them, as we all know.
This will change over time, just not as quickly as many of us would like.
That aside, stakeholder engagement is at least, if not more tricky to get right.
Engagement is still an incredibly hard job to do well. Many external stakeholders know little about your business, or only care about a particular issue.
Hardest of all to engage, perhaps, are that mythical group, often profiled by expensive PR firms as 'opinion formers'.
Sound impressive don't they? That is until you realise they usually comprise anyone in the media, NGOs, governments, academics, and think tanks (did I miss a group?) who might talk to companies and who happens to be on a PR or internal communications database. People like me.
I get perhaps a letter a week sometimes (how quaint) and several emails in the same time period, approximately, informing me that I am such a person and so could company X or Y (via their PR or market research firm, or if lucky, CR consultant) 'engage' me in some way.
Some go as far to say that I have been 'carefully selected' to engage with them. What a privilege, to be chosen from thousands to give up time to a stranger. That's often how it comes across. Not so warm.
I do tend to feel a bit of a fraud to be named as such. After all, Ethical Corporation reaches numbers in the low tens of thousands on the web and in print (I wish they were all print!) and most CEOs, even communications directors do not know us (the engaged ones do :).
I used to spend a lot of time engaging in the typical telephone calls/online surveys. The pitch is almost always that a donation will be made to charity. Occasionally one is offered a look at the summary of stakeholder comments.
There's a few problems with this approach. Here's why I now say no to being engaged this way:
1) Several times, I had to chase companies (or their agents, more often) to actually make the donations promised after the NGOs contacted me (I donate to small ones who keep track) to say nothing had arrived. I'm sure this was due to cock-up over conspiracy, but still, it left a sour taste.
2) The times I was sent a 'summary' of stakeholder views, almost all of the critical comments seemed to have been removed, or only the mildly challenging ones, plus the nice ones, were left in. So they had extremely limited value, if any.
3) When and if, follow up happens the next year, little reference is made to the previous process. No transparency is provided on who else is engaged, why, and the results of the engagement in terms of how they affected the report, or corporate strategy. In short: As a stakeholder, you can't see what impact your input had.
So you feel a little like Bill Murray's character in the film 'Groundhog Day', repeating the same conversations again and again.
(These are usually: Why do you have no credible stakeholder voices in your report, how are they involved in the process, do they have any impact on business strategy, and if not, why not)
Don't get me wrong here: I'm not saying all stakeholder engagement HAS to have an impact on your strategy. It can't all the time, or you'd be bust. 'Apply or explain' is a good rule here.
4) Most importantly, trying to run a small business (or anyway), I am time-poor, and I don't know that much about some of the companies that ask me to engage with them.
I tend to like to do a bit of research on firms before I form a view so I feel a bit fraudulent offering an opinion when I don't have much time at all to look them up, do some reading, canvass opinion and form my own view.
That aside, stakeholder engagement with opinion formers is possible, of course.
So how can you best engage so called 'opinion formers' in the contents of your report to best effect?
Here's a few thoughts:
A) Provide a reason to engage in more than cursory detail
Rather than have a PR firm or research firm contact your desired stakeholder group, why not a personalised email from a senior executive instead? The technology is there, they don't even have to write or send it. But doing it this way makes your stakeholder feel more important, less like being an anonymous part of a process.
B) Do something different, have a big idea
Don't use vague terms, like 'start a dialogue with you'. As stakeholder we don't know what that means. Why not say, 'we'd like to know what you think of us, and we'll tell you what others think too, unvarnished'.
More importantly, understand that a telephone or online survery just doesn't cut it. Sure it will get your some quantitative data, but from disinterested folks who know little about your business and are likey, in most cases, to be going through the motions to get off the phone or finish their online survey. So what does cut it?
Well, a focus group with interesting peers, like those the consultancy Context regularly host. With a good lunch, stimulating conversation and networking, the stakeholder also gains, not just the company.
How about a breakfast seminar/roundtable? We've done these with PepsiCo UK. Invitation only discussion, again with peers and interesting people. NGOs, academics, think tanks, other companies, government folks. These really work, and can be written up. Here's an example, and here's the slides.
Thirdly, how about making that online survey into an online debate? We've done this with Vodafone, and it was fascinating. Hundreds of people engaged, Vodafone gained comments they would not have otherwise, and we all learned something.
C) Make that idea interesting, and deliver it well
Don't make the engagement about YOU. Otherwise you come across as the pub bore. No-one likes the person who acts thus: "Well, that's fascinating, but let's talk about me...".
Make it about the issues. With Pepsi, we made it about water issues. With Vodafone, about how the low carbon agenda presents an opportunity for technology companies.
That's far more interesting than saying "let's go over our health and safety stats in the report". If you want to do focused engagement on your report, then pick a topic to major on, don't make it the whole thing, it won't work well if you do.
This point also refers to having a good moderator and facilitator. Simon Propper at Context makes his focus groups work because he's great at engaging people and getting them to relax and speak their minds. Some people are not. I've been to some really painful focus groups where the lead consultant, or corporate bod, just didn't have the skills.
D) Communicate it hard
This is key. Many many companies, particularly the CR departments, are frankly, crap at communications. Their communications are often haphazard, random, and poorly planned. I should acknowledge at this point that communications are of course, hard to do well.
But it's worth really thinking through how you communicate the outcomes of your engagement.
My view is a short 6-8-10 page PDF briefing, well designed and written by an external writer, is the best way. Easy to do, and easy for people to pass on. Of course you can and should use the comments for your reporting, but no-one really reads that, as we know.
E) Show some outcomes from it, a month, three months, a year on, continue your work...
The following year, or quarter, use what what discussed last time, in whatever format, to inform the new area of engagement/debate.
That way you create a series of stakeholder engagement briefings, and you can talk about what you have done a result. Of course these go in your report, but if a series of briefings refer back to each other, then over time, you've created some valuable documents which chart both your course, and the views of the participants, on fast-moving topics.
The point of this post is to argue that your corporate responsibility outcomes are in many ways dependent on your inputs, as with many business processes.
So if your inputs are often poor (as many stakeholder engagement processes currently are) what chance do you have of decent outputs that can affect business strategy?
It's very true that engagement is an evolving art, not a science.
But in between the macro model of surveys and questionnaires and the micro model of comments on your website and corporate CSR blog, lies a valuable hybrid model of focus groups, seminars, focused online and offline debates and virally-spread issue briefs that in my view, companies should spend a lot more time and money on than many currently do.
Give it a try, spend 5 or 10 K less on your CR report and invest 5-10K on one of the above, or two of them, see how it goes for you.
You won't know unless you give it a go.
Tuesday, April 20, 2010
Unpicking the myth of shareholder capitalism
This article from Harvard Business Review points out succinctly that directors of companies are not required by law to maximise profits at all times, but that they believe that they are.
Two key paragraphs are:
"...the law provides a surprisingly clear answer: Shareholders do not own the corporation, which is an autonomous legal person. What’s more, when directors go against shareholder wishes—even when a loss in value is documented—courts side with directors the vast majority of the time."
Sounds positive for the idea of longer term stewardship, doesn't it? The problem is though:
"And yet, in an important 2007 article in the Journal of Business Ethics, 31 of 34 directors surveyed (each of whom served on an average of six Fortune 200 boards) said they’d cut down a mature forest or release a dangerous, unregulated toxin into the environment in order to increase profits. Whatever they could legally do to maximize shareholder wealth, they believed it was their duty to do."
The authors argue that "...lack of communication has led to the election of directors who, frankly, don’t know what their legal duties are. Indeed, they’re being taught the wrong things".
So if they are right (and my own academic research does back this up) the idea of always considering the short term benefits of shareholders (e.g. selling) over the longer term benefit of stakeholders (e.g. not selling), is a total myth.
The problem is, if everyone believes it to be true, then it becomes truth. It becomes what is expected, justified as it is right now, by pseudo-legal pretend case law.
Part of our jobs in sustainability then, should be to help unpick this myth and show company directors that short term is not just what they are paid to think about.
The question is: How can we do that better? We could start by educating non-executives, somehow.
The other problem is of course, fund managers, and how they pressure companies under mandates from pension fund trustees, among others.
The Financial Times has a lengthy (for them) and interesting piece on this here.
Two key paragraphs are:
"...the law provides a surprisingly clear answer: Shareholders do not own the corporation, which is an autonomous legal person. What’s more, when directors go against shareholder wishes—even when a loss in value is documented—courts side with directors the vast majority of the time."
Sounds positive for the idea of longer term stewardship, doesn't it? The problem is though:
"And yet, in an important 2007 article in the Journal of Business Ethics, 31 of 34 directors surveyed (each of whom served on an average of six Fortune 200 boards) said they’d cut down a mature forest or release a dangerous, unregulated toxin into the environment in order to increase profits. Whatever they could legally do to maximize shareholder wealth, they believed it was their duty to do."
The authors argue that "...lack of communication has led to the election of directors who, frankly, don’t know what their legal duties are. Indeed, they’re being taught the wrong things".
So if they are right (and my own academic research does back this up) the idea of always considering the short term benefits of shareholders (e.g. selling) over the longer term benefit of stakeholders (e.g. not selling), is a total myth.
The problem is, if everyone believes it to be true, then it becomes truth. It becomes what is expected, justified as it is right now, by pseudo-legal pretend case law.
Part of our jobs in sustainability then, should be to help unpick this myth and show company directors that short term is not just what they are paid to think about.
The question is: How can we do that better? We could start by educating non-executives, somehow.
The other problem is of course, fund managers, and how they pressure companies under mandates from pension fund trustees, among others.
The Financial Times has a lengthy (for them) and interesting piece on this here.
Sunday, April 18, 2010
Governance and corruption in sport, new podcast
I really enjoyed taping this podcast last week with Sean Hamil of the Birkbeck Sport Business Centre.
I posted on football a couple of months ago, in what may have been a slightly ambitious argument about my favourite football club, Arsenal FC.
We spent a good half hour discussing why governance matters so much for sport, particularly football.
For all you footie fans out there, the second half of the podcast in particular might be interesting.
Enjoy, and as always I'd be interested in your comments.
Toby
I posted on football a couple of months ago, in what may have been a slightly ambitious argument about my favourite football club, Arsenal FC.
We spent a good half hour discussing why governance matters so much for sport, particularly football.
For all you footie fans out there, the second half of the podcast in particular might be interesting.
Enjoy, and as always I'd be interested in your comments.
Toby
Welcome to the lower carbon, non-flying world
It's pretty scary right now isn't it?
As I write all UK airports are still closed due to the Volcanic ash in the air over Northern Europe.
And they may stay that way for a while. My uncle is a senior British Airways engineer, and says the ash can be seriously dangerous for aeroplanes.
Under the wrong circumstances the glass in the ash can shred aircraft turbines, causing power loss, apparently.
As the back log of flights, ferry passengers and Eurostar customers builds up, there's talk of using the Royal Navy to move people across the English Channel. Echoes of a 'reverse' Dunkirk.
We don't know how long all this might last, weeks or months perhaps.
I bet many people working in the world of sustainability had similar thoughts to my own over the last few days.
That is, if we get really serious about climate change and decarbonising our lives, flight restrictions like this may be a reality at some point
If the science is right, carbon restrictions, which presumably would affect flying, should be imposed in the next decade, if politicians can sell the idea to voters.
This could be either by 'rationing' carbon (if you can do that, which I doubt) or via a combination of better trains, ferries, and much higher flight prices.
A friend of mine who works in sustainability for a big consultancy often points out that the UK's carbon reduction targets, if they are to be met, will mean a complete revolution in how we power our homes and move around goods and people in the UK.
Surely flying as it is today cannot be totally immune from change.
None of us can see it ever being as bad is it is right now in terms of flight restrictions.
But there may have to come a time, if we are in the UK not to rescind the Climate Change Act of 2008, when we get used to flying an awful lot less than we do today.
As I write all UK airports are still closed due to the Volcanic ash in the air over Northern Europe.
And they may stay that way for a while. My uncle is a senior British Airways engineer, and says the ash can be seriously dangerous for aeroplanes.
Under the wrong circumstances the glass in the ash can shred aircraft turbines, causing power loss, apparently.
As the back log of flights, ferry passengers and Eurostar customers builds up, there's talk of using the Royal Navy to move people across the English Channel. Echoes of a 'reverse' Dunkirk.
We don't know how long all this might last, weeks or months perhaps.
I bet many people working in the world of sustainability had similar thoughts to my own over the last few days.
That is, if we get really serious about climate change and decarbonising our lives, flight restrictions like this may be a reality at some point
If the science is right, carbon restrictions, which presumably would affect flying, should be imposed in the next decade, if politicians can sell the idea to voters.
This could be either by 'rationing' carbon (if you can do that, which I doubt) or via a combination of better trains, ferries, and much higher flight prices.
A friend of mine who works in sustainability for a big consultancy often points out that the UK's carbon reduction targets, if they are to be met, will mean a complete revolution in how we power our homes and move around goods and people in the UK.
Surely flying as it is today cannot be totally immune from change.
None of us can see it ever being as bad is it is right now in terms of flight restrictions.
But there may have to come a time, if we are in the UK not to rescind the Climate Change Act of 2008, when we get used to flying an awful lot less than we do today.
More on Mongolia, mining and the resource curse
From Paul French, China Editor, in Shanghai:
Zuds and Mines
In February I wrote a column for Ethical Corporation on Mongolia, and specifically on the opening minerals market there and the possibilities of the country either being hit with, or escaping, the ‘resources curse’ -
A couple of follow ups on that.
Certainly for the Mongolian people the Zud is the major worry at the moment - bone-dry summers followed by winters of unusually high winds, low temperatures and heavy snows.
Zud’s appear to be becoming more frequent (climate change?) – the last struck three years in a row, starting in 2000.
The result this year has been the worst Zud in decades killing yaks, cattle, horses, camels, goats and sheep deprived of adequate grazing.
According to the UN, this year’s zud has aleft 500,000 Mongolian herders (about half the country’s total) with 50% of their livestock dead. UN agencies have allocated US$3.7mn in emergency assistance to help remove animal carcasses, replace herders’ lost income and bring them health services.
Disasters and the need for money is affecting the Ulan Batar government’s need to increase their earnings. Hence, perhaps, plans to raise up to US$1bn though a sovereign bond issuance planned for late 2010 as well as plans to list publicly held mining, energy and infrastructure assets.
Parliamentary approval is required for these moves but they look increasingly likely given the disastrous year so far courtesy of the Zud.
The debate around the ‘resources curse’ and what will happen in Mongolia remains extremely pertinent.
Zuds and Mines
In February I wrote a column for Ethical Corporation on Mongolia, and specifically on the opening minerals market there and the possibilities of the country either being hit with, or escaping, the ‘resources curse’ -
A couple of follow ups on that.
Certainly for the Mongolian people the Zud is the major worry at the moment - bone-dry summers followed by winters of unusually high winds, low temperatures and heavy snows.
Zud’s appear to be becoming more frequent (climate change?) – the last struck three years in a row, starting in 2000.
The result this year has been the worst Zud in decades killing yaks, cattle, horses, camels, goats and sheep deprived of adequate grazing.
According to the UN, this year’s zud has aleft 500,000 Mongolian herders (about half the country’s total) with 50% of their livestock dead. UN agencies have allocated US$3.7mn in emergency assistance to help remove animal carcasses, replace herders’ lost income and bring them health services.
Disasters and the need for money is affecting the Ulan Batar government’s need to increase their earnings. Hence, perhaps, plans to raise up to US$1bn though a sovereign bond issuance planned for late 2010 as well as plans to list publicly held mining, energy and infrastructure assets.
Parliamentary approval is required for these moves but they look increasingly likely given the disastrous year so far courtesy of the Zud.
The debate around the ‘resources curse’ and what will happen in Mongolia remains extremely pertinent.
Farewell, C.K. Prahalad
Some of you might have heard the sad news that management writer C.K. Prahalad has passed away.
His Wikipedia entry notes that:
"Prahalad has been among top ten management thinkers in every major survey for over ten years. Business Week said of him: "a brilliant teacher at the University of Michigan, he may well be the most influential thinker on business strategy today.""
In the sustainable business world we know him best of course for his seminal work: "The Fortune at the Bottom of the Pyramid: Eradicating Poverty through Profits", a book which for many was a turning point away from the 'aid not trade' paradigm with regard to richer countries helping smaller ones.
That's not to say that 'trade not aid' now dominates. For various reasons, many political, it sadly does not. But "The Fortune at the Bottom of the Pyramid" helped us understand even more clearly why it makes sense.
Prahalad's theory of the poor as entrepreneurs had its critics. Some said it overlooked the fact that most people are not cut out to run businesses and are better suited to being employees of larger enterprises, and that too much focus on Bottom of the Pyramid finance and structures obscured better opportunities to lift poorer people from poverty.
Whilst no-one solution can ever be the whole story, we'll remember C.K. Prahalad for two great achievements:
First, he popularised the idea that we should stop seeing the poor as victims and see them as customers, as entrepreneurs and as a whole new market for innovation.
Secondly, he added serious weight to the arguments of others who had said similar things in the past but not had the traction that someone of his stature could help provide.
It's true that sustainability as a business strategy only went truly mainstream (i.e. Fortune 500 and MBA programmes) when publications such as Harvard Business Review began to take it seriously, some five years ago.
So it is that Prahalad's work added huge weight to the idea that we should look at poorer nations as trading partners, rather than poorer cousins.
He will be missed, but remembered.
UPDATE: Here's a 2004 interview with him in the Economist, fascinating.
His Wikipedia entry notes that:
"Prahalad has been among top ten management thinkers in every major survey for over ten years. Business Week said of him: "a brilliant teacher at the University of Michigan, he may well be the most influential thinker on business strategy today.""
In the sustainable business world we know him best of course for his seminal work: "The Fortune at the Bottom of the Pyramid: Eradicating Poverty through Profits", a book which for many was a turning point away from the 'aid not trade' paradigm with regard to richer countries helping smaller ones.
That's not to say that 'trade not aid' now dominates. For various reasons, many political, it sadly does not. But "The Fortune at the Bottom of the Pyramid" helped us understand even more clearly why it makes sense.
Prahalad's theory of the poor as entrepreneurs had its critics. Some said it overlooked the fact that most people are not cut out to run businesses and are better suited to being employees of larger enterprises, and that too much focus on Bottom of the Pyramid finance and structures obscured better opportunities to lift poorer people from poverty.
Whilst no-one solution can ever be the whole story, we'll remember C.K. Prahalad for two great achievements:
First, he popularised the idea that we should stop seeing the poor as victims and see them as customers, as entrepreneurs and as a whole new market for innovation.
Secondly, he added serious weight to the arguments of others who had said similar things in the past but not had the traction that someone of his stature could help provide.
It's true that sustainability as a business strategy only went truly mainstream (i.e. Fortune 500 and MBA programmes) when publications such as Harvard Business Review began to take it seriously, some five years ago.
So it is that Prahalad's work added huge weight to the idea that we should look at poorer nations as trading partners, rather than poorer cousins.
He will be missed, but remembered.
UPDATE: Here's a 2004 interview with him in the Economist, fascinating.
Friday, April 16, 2010
Greenpeace invades Nestle AGM over Palm Oil
This is what failed stakeholder engagement can do for your shareholder meetings.
Whilst corporate responsibility is increasingly about opportunity. Risk management cannot be forgotten, as Nestle is finding out. If the company moved faster to address Greenpeace's concerns, they could spend less time fending them off and more time on making money from sustainable opportunities. Don't you think?
Monday, April 12, 2010
Will Masdar go the same way as Dongtan?
The BBC recently published a quite extraordinary piece of public relations on Masdar, the proposed eco-city in Abu Dhabi. Quite how this passed the editors and subs I will never know.
Meanwhile, the more sober and less lightweight TheAtlantic.com, has what may be the real story, here.
The truth is not clear, at least to a blogger with limited time to investigate properly. (Let's be honest, I write these things quite quickly and hope experience allows me to get away with it :)
But The Atlantic piece has some compelling lines within it which may be telling for Masdar. Notably, that:
"...Global financial woes, however, are undermining the project's ambitious scope and putting its 2016 completion target in doubt. Developers are now planning to test-drive a portion of the city in 2013 and base further development on commercial response."
Those in favour of Eco-cities (and the jury is still out in my view) may be hoping Masdar does not go the same ways as the now infamous Dongtan, the never-existent non-starter eco city near Shanghai, that fooled the global press for a while. More on that at these links:
Whatever happened to the Dongtan eco-city?
Greenwasher – December 2009 / January 2010.
For those interested in how to avoid the mistakes of the past on eco-towns/villages, at least in China (which is admittedly a bit different from Abu Dhabi!) this article may be of use:
China’s eco-towns: Green communities – To go eco, think small.
Meanwhile, the more sober and less lightweight TheAtlantic.com, has what may be the real story, here.
The truth is not clear, at least to a blogger with limited time to investigate properly. (Let's be honest, I write these things quite quickly and hope experience allows me to get away with it :)
But The Atlantic piece has some compelling lines within it which may be telling for Masdar. Notably, that:
"...Global financial woes, however, are undermining the project's ambitious scope and putting its 2016 completion target in doubt. Developers are now planning to test-drive a portion of the city in 2013 and base further development on commercial response."
Those in favour of Eco-cities (and the jury is still out in my view) may be hoping Masdar does not go the same ways as the now infamous Dongtan, the never-existent non-starter eco city near Shanghai, that fooled the global press for a while. More on that at these links:
Whatever happened to the Dongtan eco-city?
Greenwasher – December 2009 / January 2010.
For those interested in how to avoid the mistakes of the past on eco-towns/villages, at least in China (which is admittedly a bit different from Abu Dhabi!) this article may be of use:
China’s eco-towns: Green communities – To go eco, think small.
Coke and Innocent, who saw that coming?
So not long after taking a significant minority stake in the company, Coke have now bought 58% of Innocent, the smoothie and foods firm known for a deeply ethical stance.
We were not sent a press release about this, as often happens in these cases.
Could it be that it suits both firms to keep this quiet?
In fairness to the Innocent founders, in large part they had little choice, according to a BBC News report:
"Innocent's three founders said most of the shares bought by Coca Cola were from the firm's original investor, Maurice Pinto, who wants to retire.
"As for us, we're selling a minority of our shares, but keeping the majority of them..", they said.
But they've still taken the opportunity to put a few quid in their own pockets. Who can blame them?
I wonder if we'll see the usual outcry of 'sell out' by the hardcore ethical business folks.
It's a shame in a way. I of course understand that after a lot of hard work entrepreneurs want to make some cash, and that of course investors do too.
It's just that Innocent has for some time been the one really successful smaller firm that has stayed independent, whilst all around them their equivalents have been snapped up.
I'm sure Coke will allow them to continue their excellent work, they would be mad not to, it's what they have bought. But like Cadbury and Kraft, you can't help feeling sad that there's just that little bit less diversity around.
Sentimentality aside, Coke's cash will of course help the company to grow and sustain their mission - to change the way we snack, and to help us live healthier lives.
We must credit Innocent with helping positively change the way big brands and consumers looked at snack foods and fruit juices. Now we'll see how quick they can scale their mission, whilst adhering to those core values.
Our new briefing on ethical branding, in this month's Ethical Corporation magazine, is here.
UPDATE: The BBC has this video piece on Labour's plans for a 'Cadbury's Law', here. The proposed idea, which includes needing two thirds shareholder support rather than half, for a sale to go through, stands virtually no chance of becoming law, as far as I can tell, and is probably just pure politiking by a Government desperate for the popular vote (aren't they all to be fair).
We were not sent a press release about this, as often happens in these cases.
Could it be that it suits both firms to keep this quiet?
In fairness to the Innocent founders, in large part they had little choice, according to a BBC News report:
"Innocent's three founders said most of the shares bought by Coca Cola were from the firm's original investor, Maurice Pinto, who wants to retire.
"As for us, we're selling a minority of our shares, but keeping the majority of them..", they said.
But they've still taken the opportunity to put a few quid in their own pockets. Who can blame them?
I wonder if we'll see the usual outcry of 'sell out' by the hardcore ethical business folks.
It's a shame in a way. I of course understand that after a lot of hard work entrepreneurs want to make some cash, and that of course investors do too.
It's just that Innocent has for some time been the one really successful smaller firm that has stayed independent, whilst all around them their equivalents have been snapped up.
I'm sure Coke will allow them to continue their excellent work, they would be mad not to, it's what they have bought. But like Cadbury and Kraft, you can't help feeling sad that there's just that little bit less diversity around.
Sentimentality aside, Coke's cash will of course help the company to grow and sustain their mission - to change the way we snack, and to help us live healthier lives.
We must credit Innocent with helping positively change the way big brands and consumers looked at snack foods and fruit juices. Now we'll see how quick they can scale their mission, whilst adhering to those core values.
Our new briefing on ethical branding, in this month's Ethical Corporation magazine, is here.
UPDATE: The BBC has this video piece on Labour's plans for a 'Cadbury's Law', here. The proposed idea, which includes needing two thirds shareholder support rather than half, for a sale to go through, stands virtually no chance of becoming law, as far as I can tell, and is probably just pure politiking by a Government desperate for the popular vote (aren't they all to be fair).
Friday, April 09, 2010
CR: Why local matters more than global
Here's a perfect example of just how much culture counts when it comes to local vs. global corporate responsibility issues.
You couldn't imagine this kind of thing happening in the UK, just a short distance from Denmark.
Taking this as an example then, think about how you take your UK, US, French, German or Brazilian responsible business principles to somewhere totally different, like say, India.
Along with carbon in the supply chain, this is probably the most difficult issue any company faces in corporate responsibility. And the world is becoming smaller faster than companies have been adapting.
Is it time for a global culture audit in your company?
You couldn't imagine this kind of thing happening in the UK, just a short distance from Denmark.
Taking this as an example then, think about how you take your UK, US, French, German or Brazilian responsible business principles to somewhere totally different, like say, India.
Along with carbon in the supply chain, this is probably the most difficult issue any company faces in corporate responsibility. And the world is becoming smaller faster than companies have been adapting.
Is it time for a global culture audit in your company?
Tuesday, April 06, 2010
Does corporate governance make a difference?
I wonder about this.
I've studied corporate governance for many years. Indeed, doing so was one of the reasons I founded Ethical Corporation back in 2001.
The infamous Ford vs. Firestone case really got me interested in governance, crisis management and corporate responsibility, some ten years ago now.
Since then Ethical Corporation has held conferences on the topic of Governance. I've attended many others, and even stumbled my way through an MSc in Corporate Governance and Ethics at Birkbeck, where I now teach corporate responsibility.
But what difference, I really do wonder, do governance 'structures' make when it comes to sustainability?
I've heard of at least one UK major international board figure saying that two tier boards work better than one tier, and also arguments the other way.
I tend to believe now that when it comes to governance and sustainability, it's all down to leadership, not committees, structures and articles of association.
Look at the best companies on responsible business. I won't name them here, but they just get on with it. They don't hang around waiting for committees to recommend action, they do things, things that matter.
But having said that, it can't hurt I guess, to do what Intel has just done:
"Intel directed its outside legal counsel to "write a legal opinion specifically stating that pursuant to Delaware law, corporate responsibility and sustainability reporting based upon the committee's charter, was part of the fiduciary duty of company directors.""
P&G have done the same thing. See page three on this link for details.
I guess it is important to formalise this commitment to corporate responsibility. Leadership, after all, is all very well, but leaders do not last for ever.
For smaller responsibly-minded firms, whose mission revolves around sustainability, it is much easier to embed ethics into the company's raison d'etre. They will likely only ever pick leaders who have really shown they understand why CR is a business imperative.
But for larger firms such as Intel and P&G, their next leaders could come from anywhere in the business world, and are unlikely to be a sustainability hero.
So formalising responsible business as part of the company mission is surely an important shift to help maintain momentum.
Of course, if either of those firms picks a leader who is not really interested in the issues, a line in a report or on a website, or in a document won't matter a jot. Which is why leadership is so much more important than governance structures.
So governance around sustainability does matter, just not as much as the SRI and governance activists would like to think it does.
I've studied corporate governance for many years. Indeed, doing so was one of the reasons I founded Ethical Corporation back in 2001.
The infamous Ford vs. Firestone case really got me interested in governance, crisis management and corporate responsibility, some ten years ago now.
Since then Ethical Corporation has held conferences on the topic of Governance. I've attended many others, and even stumbled my way through an MSc in Corporate Governance and Ethics at Birkbeck, where I now teach corporate responsibility.
But what difference, I really do wonder, do governance 'structures' make when it comes to sustainability?
I've heard of at least one UK major international board figure saying that two tier boards work better than one tier, and also arguments the other way.
I tend to believe now that when it comes to governance and sustainability, it's all down to leadership, not committees, structures and articles of association.
Look at the best companies on responsible business. I won't name them here, but they just get on with it. They don't hang around waiting for committees to recommend action, they do things, things that matter.
But having said that, it can't hurt I guess, to do what Intel has just done:
"Intel directed its outside legal counsel to "write a legal opinion specifically stating that pursuant to Delaware law, corporate responsibility and sustainability reporting based upon the committee's charter, was part of the fiduciary duty of company directors.""
P&G have done the same thing. See page three on this link for details.
I guess it is important to formalise this commitment to corporate responsibility. Leadership, after all, is all very well, but leaders do not last for ever.
For smaller responsibly-minded firms, whose mission revolves around sustainability, it is much easier to embed ethics into the company's raison d'etre. They will likely only ever pick leaders who have really shown they understand why CR is a business imperative.
But for larger firms such as Intel and P&G, their next leaders could come from anywhere in the business world, and are unlikely to be a sustainability hero.
So formalising responsible business as part of the company mission is surely an important shift to help maintain momentum.
Of course, if either of those firms picks a leader who is not really interested in the issues, a line in a report or on a website, or in a document won't matter a jot. Which is why leadership is so much more important than governance structures.
So governance around sustainability does matter, just not as much as the SRI and governance activists would like to think it does.
Mike Barry from M&S on sustainability strategy
A week or so ago I spent an interesting hour with Mike Barry at Marks & Spencer.
I first interviewed Mike back in 2002. What a different world we live now.
Here's the podcast we taped last week. If you are an EC subscriber, compare it to our conversation eight years ago here.
It was the 31st article I published on Ethicalcorp.com back in January 2002. We're now on almost 7000 articles since then. 6862 so far to be exact.
Back then it was all about risk. Risk spotting and basic management. Now, more than ever for companies who really get sustainability, like M&S, it's much more about opportunity.
The podcast shows how important leadership is in driving sustainability into strategy. As Mike says in the podcast, Stuart Rose, CEO since 2004, was instrumental in making it happen.
The podcast was fascinating. Check it out for yourself and post a comment. I've already had one CEO message me on Twitter having only listened to half of it, saying how useful he found it. That was great to hear.
This month, in April's edition of Ethical Corporation we've published a major briefing on ethical branding. Check it out here.
I first interviewed Mike back in 2002. What a different world we live now.
Here's the podcast we taped last week. If you are an EC subscriber, compare it to our conversation eight years ago here.
It was the 31st article I published on Ethicalcorp.com back in January 2002. We're now on almost 7000 articles since then. 6862 so far to be exact.
Back then it was all about risk. Risk spotting and basic management. Now, more than ever for companies who really get sustainability, like M&S, it's much more about opportunity.
The podcast shows how important leadership is in driving sustainability into strategy. As Mike says in the podcast, Stuart Rose, CEO since 2004, was instrumental in making it happen.
The podcast was fascinating. Check it out for yourself and post a comment. I've already had one CEO message me on Twitter having only listened to half of it, saying how useful he found it. That was great to hear.
This month, in April's edition of Ethical Corporation we've published a major briefing on ethical branding. Check it out here.
Responsible business interest growing in Serbia
A couple of weeks ago I had the pleasure of going to Belgrade to talk at a conference on business and climate change.
I spent a couple of fascinating days with my host, Sinisa, a local sustainability expert, and some executives at the mobile company Telenor Serbia.
I decided to try and frame the presentation that I gave around opportunity. It was quite hard to do given part of my brief was to try and summarise climate change science as best I could.
The Telenor Serbia CEO was impressive.
In the discussion section of the conference many companies were pointing out that whilst they do their best on preparing for the recycling of their products, they are let down by a lack of infrastructure and government action.
I've heard this type of complaint in many countries in central and eastern Europe in recent times.
The Telenor Serbia CEO had an excellent response, saying words to the affect of: "We can't wait for Government, or use them as a reason to slow us down, we've just got to get on with this kind of thing and make it happen ourselves". A laudable attitude.
Anyhow, here's what I came up with as a presentation on the day. I'd be interested in your comments:
I spent a couple of fascinating days with my host, Sinisa, a local sustainability expert, and some executives at the mobile company Telenor Serbia.
I decided to try and frame the presentation that I gave around opportunity. It was quite hard to do given part of my brief was to try and summarise climate change science as best I could.
The Telenor Serbia CEO was impressive.
In the discussion section of the conference many companies were pointing out that whilst they do their best on preparing for the recycling of their products, they are let down by a lack of infrastructure and government action.
I've heard this type of complaint in many countries in central and eastern Europe in recent times.
The Telenor Serbia CEO had an excellent response, saying words to the affect of: "We can't wait for Government, or use them as a reason to slow us down, we've just got to get on with this kind of thing and make it happen ourselves". A laudable attitude.
Anyhow, here's what I came up with as a presentation on the day. I'd be interested in your comments:
Business And Climate Change March 2010
View more presentations from Toby Webb.
Bribery and ethical investors
Socialfunds.com reports that UK socially responsible investment houses may be becoming more interesting in what large companies are doing on bribery and corruption.
With fines going up and up, and censure now also able to affect individual directors of companies, even if they didn't know what was happening, investors ought to be more interested than many are in the potential of a bribery case to impact shareholder value.
According to SocialFunds.com:
"...the risk to investors of poor corporate performance on bribery by their portfolio companies is significant. EIRIS devotes the concluding section of its report to recommendations for investors seeking to promote good practice. It recommends that investors implement bribery considerations into their investment decision-making process, and focus their engagement with companies on transparency and reporting."
We've got an event coming up soon in D.C. on this topic. More here.
With fines going up and up, and censure now also able to affect individual directors of companies, even if they didn't know what was happening, investors ought to be more interested than many are in the potential of a bribery case to impact shareholder value.
According to SocialFunds.com:
"...the risk to investors of poor corporate performance on bribery by their portfolio companies is significant. EIRIS devotes the concluding section of its report to recommendations for investors seeking to promote good practice. It recommends that investors implement bribery considerations into their investment decision-making process, and focus their engagement with companies on transparency and reporting."
We've got an event coming up soon in D.C. on this topic. More here.
Ethics in China, losing your job is not what it was...
From Paul French in China (where this blog is blocked!):
Sacked-Then-Back cadres
Going back to all those columns and blog posts Ethical Corporation did around the recent spate of food safety scandals in China - remember fake infant formula and 'swollen head' syndrome and of course the Sanlu tainted milk scandal that involved New Zealand's Fronterra, Sanlu's joint venture partner who got a very easy ride in the name of protecting inward investment. Fronterra, it has to be said, were very lucky.
The new mood of the Chinese government towards foreigners thought to have transgressed the law is rather different on everything from the execution of UK citizen Akmal Shaikh to the jailing of Australian Stern Hu of the Rio Tinto 4.
Slightly later and some Fronterra execs might have found themselves called to account rather than hastily bundled out of the country.
But what of the Communist Party officials involved in recent scandals and supposedly punished. Turns out the punishments rarely last for long resulting in the phenomenon of the Sacked-Then-Back cadres.
An outcry on the Chinese internet about Sacked-Then-Back cadres started with the news that Meng Xuenong, a former Mayor of Beijing and Governor of Shanxi province who had been sacked twice since 2003 (once for mishandling and lying during the SARS crisis in Beijing and then once more for failing to organize adequate disaster relief during a mudslide in Shanxi).
However,now he has been appointed to a third senior position, as deputy of the works committee of the departments under the communist party's central committee (long winded admittedly, but quite important all the same).
Here's another Sacked-Then-Back official who's made it into our pages before: Li Changjiang, former head of the general administration of quality supervision, inspection and quarantine - resigned over the melamine tainted milk scandal in 2008, now back as a deputy chairman on a working group supposedly cracking down on online pornography in China.
Sacked-Then-Back officials obviously make a mockery of the Party's own disciplinary system, the Party's supposed accountability and annoy people intensely.
Now the Party has introduced a new rule - no promotion for 2 years after being disgraced.
Most people see this as stupid - what's a two year hiatus for a senior official anyway? does the Party really think that sends out the right message and, who really expects it to be implemented at a local level anyway. the same week Chinese media reported that two corrupt Party secretaries - in Shenzhen and Hainan - had both resumed their former posts after short prison sentences!
Sacked-Then-Back cadres
Going back to all those columns and blog posts Ethical Corporation did around the recent spate of food safety scandals in China - remember fake infant formula and 'swollen head' syndrome and of course the Sanlu tainted milk scandal that involved New Zealand's Fronterra, Sanlu's joint venture partner who got a very easy ride in the name of protecting inward investment. Fronterra, it has to be said, were very lucky.
The new mood of the Chinese government towards foreigners thought to have transgressed the law is rather different on everything from the execution of UK citizen Akmal Shaikh to the jailing of Australian Stern Hu of the Rio Tinto 4.
Slightly later and some Fronterra execs might have found themselves called to account rather than hastily bundled out of the country.
But what of the Communist Party officials involved in recent scandals and supposedly punished. Turns out the punishments rarely last for long resulting in the phenomenon of the Sacked-Then-Back cadres.
An outcry on the Chinese internet about Sacked-Then-Back cadres started with the news that Meng Xuenong, a former Mayor of Beijing and Governor of Shanxi province who had been sacked twice since 2003 (once for mishandling and lying during the SARS crisis in Beijing and then once more for failing to organize adequate disaster relief during a mudslide in Shanxi).
However,now he has been appointed to a third senior position, as deputy of the works committee of the departments under the communist party's central committee (long winded admittedly, but quite important all the same).
Here's another Sacked-Then-Back official who's made it into our pages before: Li Changjiang, former head of the general administration of quality supervision, inspection and quarantine - resigned over the melamine tainted milk scandal in 2008, now back as a deputy chairman on a working group supposedly cracking down on online pornography in China.
Sacked-Then-Back officials obviously make a mockery of the Party's own disciplinary system, the Party's supposed accountability and annoy people intensely.
Now the Party has introduced a new rule - no promotion for 2 years after being disgraced.
Most people see this as stupid - what's a two year hiatus for a senior official anyway? does the Party really think that sends out the right message and, who really expects it to be implemented at a local level anyway. the same week Chinese media reported that two corrupt Party secretaries - in Shenzhen and Hainan - had both resumed their former posts after short prison sentences!
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