…………………..who is the most corrupt of all?
Well, the annual Transparency International Corruption Percpetion Index was released today and I can reveal the top 6 least, and bottom 6 most corrupt countries in the world are:
This is a well respected index based on the percpetion of business people and country analysts.
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I picked up a copy of Robert Reich’s new book, Supercapitalism, last week in the US. In it he argues for the banishment of CSR in favour of better regulation. He claims that the push for better corporate governance makes corporations less likely to be socially responsible. This morning I read Dennis Howlett’s post: ‘Does Governance mean a thing?‘
Are we at a point where the unfettered excesses of some corporate executives has created enough public disgust that will turn into punitive legislation? I doubt it.
I think both Reich’s book and Dennis’ post share a whiff of mischief.
Reich has always argued in the past that CSR is about the externalities. Specifically he has argued CSR is about proactively identifying the externalities that pose the greatest risk to intrude into the enterprise and become much more serious internalities if left to hang. Similarly, George Soros, arguably the world’s highest value philanthropist, in his book Open Society argues that businesses should adopt CSR to the extent that doing so reduces risk and therefore improves shareholder value. But in objecting to the enterprise culture of Asda, Sainsburys, Morrisons, Tesco and Safeways Dennis seems to be confusing the role of corporate governance and the role of government.
In Supercapitalism Reich says that improved corporate governance makes businesses less socially responsible as it underlines the supremacy of shareholders over other societal stakeholders. Implicit here is that what is good for society is bad for shareholders and that CSR only constitutes philanthropy – both of which is tosh.
Our society and the dynamics of CSR can be explained within a triangulate between business, civil society and government and the battleground is over the coverage of externalities. If you don’t like the enterprise culture of Tesco then it really is an issue for the government to decide whether choice, quality, convenience and low prices are to offset the social and environmental issues associated with long supply chains and the overshadowing of local businesses. But the ambivalence about this is clear …. no one seems to be holding up their hand to vote to banish these businesses. And even if the government is actually unwilling to act, civil society is drawing strength to fill the vacuum – some are willing to operationalise solutions with business such as WWF, others hold firm on ideology. It’s a dynamic social situation and I don’t think anyone is quite clear how long or if the centre will hold. It is a topsy turvy world and strange bedfellows are emerging: in today’s FT you can read how Wal Mart is now mandating that all their suppliers report their carbon footprint. As I wrote, last week on Wal Mart, love them or hate them they are becoming a potent force for setting de facto social and environmental standards in concert with civil society even whilst government regulators snooze. What’s more they are clearly doing this in the interests of shareholder value.
I still argue that CSR & GRC is in the definite interests of shareholder value if applied intelligently towards external issues that pose risk to the sustainability of the enterprise but it does not replace the role of government. Corporate governance is not corporate government.
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Last week the socially responsible investment community equivalent of the Oscars – the annual review of the Dow Jones Sustainability Index (DJSI) was unveiled and for the first time SAP has taken the lead in CSR performance for the software sector. It’s certainly a cause for celebration but maybe it’s more an occasion for Sekt than Cristal. Although the software industry is closing ground, it still lags the technology sector and the DJSI overall.
On the surface of it this seems counter intuitive. Surely if there is one industry naturally disposed to sustainability it ought to be the software industry. I am bias, but I can imagine no other industry that has done more to harness and multiply the human intellect for the benefit of the many. It is ubiquitous, part of every aspect of your life from sun up to sun down, always there making stuff work better, cheaper, faster with the least amount of resources. It enables and empowers both the individual and the collective. Software has been instrumental to global economic development for decades and arguably our expanding global economy and it’s connectivity could not flourish without it. Admittedly it’s easy to overlook how software contributes to quality of life but try to imagine your life without it. Software has also been an important enabler of civil society – how could the press, NGO’s, pressure groups and private citizens today possibly do without software as a tool to enable them to be the much needed watchdogs over government and business?
So why the apparent disconnect on sustainability? I think there are two major reasons. From the outside in, without a traditional physical manufacturing supply chain and distribution system it is less obvious how to assess the sector’s overall contribution to and impact on global sustainability nor is it necessarily easy to measure progress over time. And because software leads on innovation it takes time for society to understand the implications of new technology so societal judgment remains in perpetual suspension.
From the inside out it is equally difficult to see how and where to engage and perhaps we suffer a complacency to assume the industry is on the side of the angels, delivering only solutions and not problems. That is not to say that the industry does not appreciate the impact of technology on society and there are certainly issues of real concern such as access, security and privacy well recognised. But it is more difficult in the software industry to incrementally measure progress on these issues in the way one can measure a reduced physical impact of a retailers supply chain or the rate of generation of alternative energy sources. These issues can also constitute real flip side social dilemmas such as privacy v transparency, access v security which can make easy non financial metrics just a bit more elusive.
So what to do? The industry needs to catch up with the broader corporate community, prepare CSR reports to GRI standards of non financial reporting and have them assured for materiality to societal stakeholders. How do we find out what is materially important to society? We need to come out from behind the firewall and dialgoue in a meaningful way with concerned stakeholders not just about what is important to us but also about what is important to them. We can begin to make these connections on CSR now starting with the tools we know best in web 2.0. Hugh MacLeod has shown how easy it can be to start these conversations with his blue monster concept. How about industry vendor CSR blogs? It’s not as if we can say we don’t have the bandwidth.
I think the prevailing perception as reflected in indices such as the DJSI, fair or not, will soon change. The need to co-innovate, to collaborate and communicate in an increasingly community based industry will drive more openness, understanding, dialogue and public accountability in the software sector. The new generation of millennial workers, digital natives as they are, will not least demand this of us either as users, employees or both. The spirit of social media and web 2.0 will be a powerful force to push the software industry out of the shadows on CSR and the industry wil be all be the better for it.
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I was really inspired by all that cool design stuff from Stuttgart over at Vendorprisey this week so I’m getting on that train for a bit. This whole topic caught my eye at Triple Pundit.
Sun Microsystems were looking for design concept for portable data centre that is also efficient to cool and is made of recylable materials. Answer: the BlackBox project – a data centre in used cargo containers. It’s certainly portable, cheap to cool and is recycled.
But why stop there, why not live in one too? Treehugger is showing off some racy designs for used containers.
I wonder ……….
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I was inspired if only by the title of this recent Economist Free Exchange blog. I often think of supply chain as a B to B concept when, of course, the supply chain exists solely for the final link – you and me. But how much responsibility do we take for our consumption and the associated externalities when we forage for bargains? In my opinion, I think we are OK with the low prices so long as the externalities along the supply chain stay hidden. €2 for a T-shirt? Great. €10 for a camera? Even better, just don’t ask any questions.
Occasionally, reality comes crashing in and we hear the stories of sweat shops, safety & quality issues, not least recently from China. Thankfully, we have quality standards such as SA8000 to assure supply chain ethics and more and more businesses are adopting such. But what of the carbon externalities? Who should be responsible for this cost? If you look at carbon from the point of view of the nation state then indeed the statistics are damning for BRIC countries. China’s incremental annual growth in energy consumption equates to roughly the entire energy requirements for the state of California for one year. If the UK just shut down energy production right now, the diverted capacity would only keep China going for three weeks.
So what is China doing with all this energy? They are busy making stuff mostly for you and me. If you take a view of carbon accounting from the point of view of the end consumer and you allocate carbon in this manner the statistics would again clearly show that it is the developed world’s consumption that is causing the lion’s share of Green House Gas emissions.
So who should act? I felt a little humbled by an article in the September 3, FT about how the Chinese government has announced a campaign to ask citizens to reduce personal energy consumption. The campaign goes so far as to suggest that indulgence in the local tipple, baijiu, should be limited to a half litre a month in order to save 0.88 kg of carbon per person. Civil servants have been saddled with pay related eco efficiency KPI’s. It also stretches credulity to suggest that clothes might be washed only once a month. Of course this campaign is doomed, because the fact is energy in China is consumed overwhelmingly in the industrial sector by the people busy making stuff for export. Still we cannot but acknowledge that the government is at least engaged.
Today’s FT has a remarkable feature on the greening of Wal Mart. It turns out lobbyists are now flocking to Bentonville rather than Washington to try to influence Wal Mart’s environmental supply chain standards which apparently is now a more potent force in the economy than government regulation. Voluntary compliance it seems is here to stay as an important factor for supply chain efficiency as well as risk and reputation management. According to Kert Davies of Greenpeace, USA:
‘We spend a lot energy trying to get giant corporations to move an inch and here we have the biggest corporation of them all shooting for the same targets. ……… They’re acting as we would act, .. to get full carbon accounting even before it is required by regulation. …. I love that they just go for it’
The flip side of this is that Wal Mart may eclipse the role of government and split the environment lobby between those who believe Wal Mart’s standards are too low and illegitimate and those who are grateful for incremental progress. I am with the latter opinion. This is a remarkable turn of events and the way is clear for anyone, competitor or regulator to raise standards further beyond Wal Mart’s voluntary action.
So it seems to me the responsibility is reaching down the supply chain finally to you and I. Tesco too has promised carbon labeling. So when you go to the supermarket with your weekly budget of not just money but also a fair personal carbon allocation of the carbon we can afford to emit, what will you choose to buy?
Technorati Tags: CSR, Sustainability, Supply Chain, GRC, Governance, Risk, Compliance, Wal Mart
Categories: CSR · Environment · IT · Sustainability · Uncategorized
I must admit I sometimes get confused about this myself. Is it talk first then think or is it the other way around?
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The week got off to a good start with news from Oekom, one of the most influential CSR ratings agency in Europe, that SAP has been selected for the Hanover Stock Exchange Global Challenges Index. The index is made up of only fifty constituents from a global pool of companies and the twist is that the company must not only have a prime rating but must also be doing something extra to meet big global challenges such HIV, poverty, corruption etc. For quite a few years SAP has supported anti-corruption efforts including a peer review process set up in Nigeria by Soji Apampa and supporting development of Transparency International Business Principles for Countering Bribery programme. SAP is also listed on the FTSE4Good and Dow Jones Sustainability Index.
To be really honest, I have mixed feelings about the effectiveness of socially responsible investing alone as an agent for change. I’m still more comfortable with politicians rather than markets making social policy decisions. In the past socially responsible investing (SRI) focused maybe too much on one size fits all thresholds: do you have a code of conduct? Yes. Tick box. When activist SRI investors did engage directly they quickly found themselves at odds with the mainstream crowd. A few years ago I had lunch with the Head of Investor Relations for a well known extractive player with a great reputation for CSR. He told me of a surreal situation at an investor roundtable in NY when one SRI player tried to assert influence saying:
‘I have a €2 bn holding in your company and I am demanding a comprehensive human rights impact statement for your pipeline/plant in development’.
He said he would consider it and on to the next participant for their question:
‘I have a €50 bn holding in your company and I demand that you ignore the points raised in the previous question’.
Today there seems to be a growing trend towards a more integrated approach of risk analysis focusing on the most material environment, social and governance (ESG) factors. I am a particular fan of the Responsible Engagament Overlay (REO) approach of F&C Asset Management headed up by Karina Litvack. This team is putting out really useful analysis. In July Goldman Sachs launch it’s GS Sustain Index and this lengthy report makes for really interesting reading. The bottom line conclusion is that generalised, unapplied CSR for CSR sake does not add shareholder value. However, if CSR means a better understanding of the material ESG factors and is applied within the context of the corporate strategy towards both risk and opportunity then it certainly does add significant value.
I welcome this convergence between core corporate governance and social responsibility. Standards such as DJSI, FTSE4Good and Global Challenges represent screens for a small but growing part of the investment market. Their major contribution has been to educate investors and businesses and lead us towards a better understanding of broader governance, risk and compliance responsibilites. A sign of their success is the mainstreaming we are now starting to see.
Now for the light relief. Have a look at this video from the people at Triple Bottom Line. It makes a powerful point for what SRI is all about. You have been warned!
Technorati Tags: TBLI, SRI, SAP, RISK, GRC, Governance, Risk, Compliance, CSR
Categories: CSR · Uncategorized
What do Leonardo DiCaprio, the Pope, Aer Lingus and Ian Paisley have in common? Read on and find out.
Carbon offset purchasing has been a somewhat controversial if pragmatic solution towards climate change. Back in April, Andrew Revkin writing in his International Herald Tribune column quoted Denis Hayes of the Bullit Foundation:
“The worst of the carbon-offset programs resemble the Catholic Church’s sale of indulgences back before the Reformation,” said Denis Hayes, the president of the Bullitt Foundation, an environmental grant-making group. “Instead of reducing their carbon footprints, people take private jets and stretch limos, and then think they can buy an indulgence to forgive their sins. ….This whole game is badly in need of a modern Martin Luther…”
What can I say? Someone in the eternal city must have been reading the IHT and had a light bulb or two go off. Guess who is setting up shop for brisk business in indulgences at the Greenpeace festival in Waveney this weekend? Head Office is also separately getting in on the act by declaring this Sunday ‘Save Creation Day’ according to the Beeb.
Not that the Holy See is being complacent about climate change, while it is clearing the path for us to the eternal, it is also still managing it’s own carbon footprint back here on this mortal coil. Last month the Vatican announced a massive carbon offset programme in Hungary towards becoming the first carbon neutral sovereign nation on earth. Then this week with spiritual and physical offsets all in place the Vatican announced it’ entry into the airline business. With the environment dimension accounted for how well is this venture doing on the social and economic dimensions of sustainability? It’s a mixed bag, the inaugral flight was not without it’s customer relations issues when pilgrims were prohibited from taking holy water on board. Even the vatican is not immune to the anti terror security gauntlet at airports these days. God’s reputation for price optimisation and overall yield management also took a drubbing from the people at Ryanair, now the competition in more ways than you might imagine:
“Ryanair already performs miracles that even the Pope’s boss can’t rival, by delivering pilgrims to Santiago de Compostela for the heavenly price of €10″
So there is a great deal more to sustainability than technical environmental management, measurement and offset. Even the vatican must face competition, socio political externalities and return on capital hurdles to sustain this business. Spare a thought then for poor Leonardo DiCaprio who had to face an unexpected and multi dimensional sustainability question this week from Kate Coe of the Grist at the Time Warner launch of The 11th Hour. The question: is 11th Hour a union movie? Answer: err… no.
Kate’s objection is this:
‘ …..it’s impossible to discuss — and attack — climate change without addressing issues of social class and economy. Encouraging conscious consumerism without addressing the underlying class and labor issues is irresponsible — no matter how green the product, how progressive the process.’
It was a bit harsh but it does underline an important point we see in abundance in the aviation business and elsewhere. Taxes, voluntary or otherwise, may not be an effective method to reduce consumption. Ryanair say it isn’t here and I think they are probably right. So does the extra cost associated with an offset or tax amount to an indulgence for the wealthy and an object of exclusion for the poor? Tread carefully the politician who tries to take away our access to air travel. Also tread carefully the business who sells carbon off sets or other environmental premiums. With still immature standards for carbon markets, assuring consumers so to maintain confidence of the bottom up consumer led action on climate change is paramount. See AccountAbility’s excellent report What Assures Consumers On Climate Change? here.
Consider the plight of Aer Lingus. Last year Ryanair attempted to take over the airline just one week after it was floated and currently holds a 29% holding. In recent weeks it has tried to force Aer Lingus to call an EGM to force a reversal of it’s decision to transfer it’s Shannon to Heathrow service to Belfast where it will set up a new base with new and less favourable labour conditions. The Irish government also holds 25% and employees another 22%. The opposition party and local politicians have placed Aer Lingus and the government under immense pressure to U turn in the interests of the economic & social welfare of the west of Ireland region. If I was cynical I might assume Ryanair would prefer to see Aer Lingus struggle to operate the less profitable Shannon – London route in head to head competition than move to the more profitable base in Belfast. Aer lingus has rejected Ryanair’s call for an EGM as they believe listening to their number one shareholder also the number one competitor on this issue would be a breach of competition law and that Ryanair’s true motive is to destroy shareholder value at EI.
So aside from the environmental stakeholders, Aer Lingus is also finding itself juggling the competing & conflicted demands of customers, politicians, shareholders, employees whilst trying to stay within the framework of good corporate governance. Even the church, without the divisions of reformation this time, has gotten involved in this unholy row. No wonder, CEO Dermot Mannion had a jittery PR launch in Belfast. Look here for an hilarious picture from the event. Which finally brings us to Ian Paisley. It’s a huge political breakthrough that Ian Paisley now shares power in Northern Ireland with Sinn Fein in a devolved government. Nothing short of miraculous and personally having grown up in Ireland during the troubles not something I ever thought possible. I don’t know what Ian Paisley thinks about the sustainability performance of either Aer Lingus or the Vatican though we all remember well his infamous heckling of the Pope at the European Parliament in Strasbourg back in 1988. Seems like a lifetime ago. Watch it here.
And speaking of things never thought possible, what is the point of all this? It’s all to say that sustainability and stakeholder management is a complicated and long game. It may seem intractable and dare I compare them but so too did the problems of Northern Ireland. Some ideas will fall by the way side, others will catch on and go to strength. Climate change is a huge problem but maybe it is just about possible for us to find in time not just a technical solution but a solution that also addresses all the associated social, political and economic issues.
In the meantime, it is critical for all major organisations whether business, government or even the church to have antenna up, information on hand and be at the ready to engage intelligently with increasingly enabled and informed stakeholders.
Technorati Tags: AccountAbility, Sustainability, Ireland, CSR, Aer Lingus, Ryanair, Aviation,
Categories: CSR · Enterprise Software · Environment · IT · Sustainability · Uncategorized
……..and probably the hardest. How to break cover and explain why I make a claim to public space? The truth is that concepts of sustainability and CSR can masquerade at first glance as fairly simplistic ideas of fresh air and apple pie, who could be against it?In fact, it is an immensely complex set of ideas to try to put into practice. What are the material responsibilites, how do we reconcile them within market constraints, where are the opportunities, who are the legitimate stakeholders? And although I have worked on both sides of the desk on corporate side CSR here and also as CSR campaigning advocate here and here for quite a few years I still find that easy answers are as elusive to me as ever. Some think sustainability has an overly zealous nature. It doesn’t help that it is hard to define the equilibrium point of sustainability much less how to get there. But on the other hand and speaking of zeal, what’s with the invisible hand?
The one thing I have learned from the campaigning side is the need to be pragmatic rather than too ideological. It seems counter intuitive that principled campaigns need to be pragmatic to be successful but it’s true. Perfection can’t be achieved in one campaign. On the other hand I think business leaders counter intuitively maybe more shackled by narrow market idealized view to the cost of really understanding the true impact of broader externalities and material threats to reputation and the associated flip side opportunities. The internet, globalisation, accelerating pace of innovation combined with global problems of climate change, population explosion and abject poverty are raising the stakes for business on all aspects of corporate governance and strategy execution. CSR really never has been more important and is here to stay in one form or another.
Today I work on CSR at SAP and I sense the next few years will be very interesting for the company and the entire industry in this subject area. I suspect our sector will come under more focus as society demands more than just transparency but also innovation to enable a more sustainable global system. I hope through this blog I can distill a few ideas, float a few baloons, strike up a few ardent debates and share a bit of the day job experience and draw on the wisdom of crowds. I’ll try to draw on gallows humour along the way also. Web 2.0 is just made for such dialogue and I’m a little surpised that there seem to be far fewer CSR blogs out there than I expected. Maybe I’m looking in all the wrong places but if there are only a few out there now I am sure there will be many more very soon.
Technorati Tags: SAP, CSR, Sustainability, Corporate Citizenship, ERP, Enterprise Software
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