I was watching BBC's Daily Politics on Monday to catch the latest on the RBS bonus affair that I had just blogged on, and, lo, there was an item on responsible capitalism. They focussed on B&Q, an excellent example of responsible business, but fell into the old trap of thinking the scope of corporate social responsibility begins and ends with supporting the local community. But then, in the interests of balance, up popped a chap from the Adam Smith Institute to declare that CSR was "a tax on the consumer."
Deep breath.
Count to ten.
This is the economics of Milton Friedman - that the only responsibility of an business is to maximise profits for shareholders. Well, we're still living with the consequences of that sort of thinking - the sub prime bubble, Ponzi-style financial "products", bank crashes, debt crises, the age of austerity etc, etc. Throughout history, unrestrained markets - in this case financial markets - have bubbled and burst with painful consequences - not least to the shareholders that Friedman claims should be put first, second and last. Left to itself, Adam Smith's famous invisible hand sometimes punches us in the face.
Let's face facts. Business operates in society, society exists in the environment. To state the bleedin' obvious, businesses - and therefore the supply side of the economy - are made up of people. The demand side of the economy is made up of people. Business is a social issue, people delivering value to people in return for financial reward. You can't get away from that.
And even from a narrowly financial point of view, CSR is good business. Marks & Spencer has made a tidy profit on Plan A, doing the "heavy lifting" on environmental and social issues on behalf of their customers who clearly see that as added value rather than an added cost. B&Q is the fourth largest home improvement chain in the world, so their environmental and social projects have hardly held them back. Procter & Gamble is the highest ranked consumer goods company on the Forbes Global 2000 list, yet they give away their water purification product for free to people in developing countries.
As a consumer I buy from all three because of that added value. And would you rather have shares in a responsible, successful business like these as opposed to worthless shares in an irresponsibly crashed bank?
The title of this post is tongue-in-cheek, by the way. I'm not saying the guys at the Adam Smith Institute are stupid, in fact they are possibly a little too clever to fully understand the real world around them. A little less IQ and a little more EQ (emotional intelligence) might set them in better stead.
The Stephen Hester Bonus saga reads like a really good episode of The West Wing - or indeed my current favourite political drama, Borgen.
The President/Prime Minister inherits a 83% public stake in one of the banks that collapsed through greed and stupidity in the economic crisis. With it comes a newish Chief Exec, Stephen Hester, a board of directors and multi-million pound salaries and bonuses. Each year these make the headlines to much grumbling but no outrage until this year when the public, now feeling a tight squeeze on their own incomes from the Prime Minister's austerity programme, start to get angry and the Opposition starts to land a few telling blows. Sensing a threat, the bank's board of directors threaten to resign if they are over-ruled - arguing that Hester has been doing a good job and should be paid what was agreed.
The Prime Minister has a big dilemma - stick to the contract and take a big political hit, or sacrifice the contract (if he can) to send out the message that everyone is in it together, risking disruption at the bank which could cost the taxpayer more than the bonus. As he mulls on these options, Mr Hester finally decides that it is not worth £1m (he has plenty of those) to become the most hated man in the country and says he will voluntarily give up the shares. The PM sighs a big sigh of relief. Credits roll.
There was another story in the press last week which made fewer ripples, but was just as interesting from an ethics point of view. David Harnett, boss of Her Majesty's Revenue and Customs, accused people who pay domestic cleaners and builders cash in hand of encouraging tax evasion. That's the very same David Harnett who made 'sweetheart deals' with big corporations allowing them to pay less tax than they should - at a cost to the Treasury of some £20bn. So it is OK for big business to dodge tax - as long as the cleaner on minimum wage doesn't.
I could make lots of political points here, but the issue that is most relevant for this blog is the difference between the individual and the organisation when it comes to responsibility. We talk about corporate social responsibility, but what we are really talking about is interaction between the individual ethics of a group of people. One of the craftiest ways to hide an unethical decision is to make it by committee - and remuneration committees have been blamed for the wage inflation which has UK directors' pay rising much faster than stockmarket results would suggest they should. Likewise HMRC is clearly tougher on individuals than they are on organisations - cleaners don't get sweetheart deals - but why let the big guys off?
At the end of the day, organisations are made of people and those people must take responsibility for their own decisions - as Stephen Hester has belatedly realised. Maybe the term Corporate Social Responsibility is a little misleading as corporations cannot have ethics - instead we need more Executive Social Responsibility.
We will be holding two Green Academy on-line sessions on 7 December 2011. Each session lasts for one hour. You need access to a computer with sound or a computer and a telephone. You will receive a workbook to apply the learning to your organisation prior to the start of the session.
Do they believe you will do what you say you will do?
Do they believe you are telling the truth, the whole truth and nothing but the truth?
Well if you are serious about green business or corporate social responsibility, then trust is the magic ingredient. To facilitate change inside the organisation as a Green Executive, you must be trusted as an individual. To reap the rewards of green business in your marketplace and indeed the jobs market, your organisation must be trusted.
Marks & Spencer is a trusted brand. Its Plan A sustainability programme was developed to protect that trust in the 21st Century.
Apple is trusted to create great products, but it is not trusted on green issues or supply chain working conditions.
Leadership guru Warren Bennis lists Bennis lists five Cs for trust:
Competence: the technical and managerial competence to engage properly and deliver on promises;
Constancy: that you can be relied upon to do what you says you will do, even when the going gets tough;
Caring: stakeholders have to feel that their welfare is of genuine concern;
Candour: openness, transparency and honesty;
Congruity (or authenticity).
How many do you score on? How many would your boss get? The organisation?
If you've got it, cherish, nourish and protect it - it is priceless.
I'm reading last year's ethical must-read, The Spirit Level by Richard Wilkinson and Kate Pickett. The central thesis of the book, if you're even further behind the curve than I am, is that virtually every social ill (poor health, imprisonment, low life expectancy etc, but weirdly not suicide) is worse in unequal societies like the USA and UK than in equal societies like Japan or Sweden. The book caused a minor political fuss as free-marketeers denounced it as a left wing tract, however the authors point out that equal societies can be either big-state like Sweden or small-state like Japan, so the left/right distinction is irrelevant. Whatever the authors' politics, it is hard to argue with the numbers - and it is a book full of data.
So what has this got to do with business? Well, as Business Secretary Vince Cable pointed out recently, in 1998 the average FTSE 100 Chief Executive's pay was 45 times the UK average salary, but in 2010 that factor had risen to 120. So certainly in the UK, the corporate pay structure is increasing inequality and thus, if you accept The Spirit Level's thesis, contributing to a whole raft of social problems.
It is beyond the scope of this blog to debate what our political leaders could and/or should do to address this issue, but given CSR stands for corporate social responsibility, business leaders cannot idly waive responsibility either. Unfortunately, best practice on executive pay seems to start and end with transparency.
Many third-sector organisations set a maximum ratio between best and worst paid in the organisation - should the for-profit sector follow suit? Wouldn't that set a "responsible" business out from the crowd?
I usually start off my seminars by asking delegates why their company should go green (try it - much more effective than you telling them why they should go green). The first answer is almost always "Save money" and, after compiling a list of other reasons, this is identified as the most important.
I always challenge that answer. The delegates have explained how customer pressure is a factor, yet they then discount this in favour of short term cost cutting - maybe it's the current economic climate to blame. I usually point out that, without customers, the bottom line is an irrelevance.
There is always more scope for increasing sales than cutting costs. This is an essential truth to get across to anyone doing investment appraisals of green projects - they need to factor the scope for raising the top line into their calculations, rather than just a simple return on investment (ROI) assessment.
Interestingly those who seek to raise the top line will cut costs into the bargain - Marks & Spencer's Plan A programme was never intended to save money but it has. But if you take a penny pinching attitude and expect a direct ROI on projects, you will never back the ambitious ideas that will set you apart from the pack in the market - missing out on the big rewards of green business.
So, don't forget to get the bean counters greened up and aware of their importance in the Sustainability performance of the organisation.
The mining giant Glencore has just released a corporate responsibility report as it promised when it listed on the London Stock Exchange earlier this year. I'm not going to comment on the company's performance as this has been done at length by many others, but I noticed this telling passage in the Guardian:
The company said it also collected statistics on "permanent damage injuries", and had other figures for health and safety, but that it only publicly disclosed what was required by the Global Reporting Initiative [GRI] standards.
This last statement bothers me. It used to be that industries did just enough on corporate responsibility issues to stay within the law - compliance, no more, no less. Then everyone started talking about the benefits of going "beyond compliance" and from that a number of standards emerged to guide companies, including the GRI mentioned above. But instead of embracing the spirit of transparency that the GRI is intended to spread, Glencore have simply treated the GRI like a regulation of old - compliance, no more, no less.
While having standards is both useful and important, to really benefit from CSR the "beyond compliance" ethos must continue - each standard must be seen as a minimum baseline, not a rigid framework.
In this particular case, greater transparency will drive better performance, and will avoid the kind of negative publicity Glencore have generated by sitting on these stats. If you have a skeleton in your cupboard, kick it out!
When you read this I'll be off on holiday for two weeks visiting family in Belfast. So we'll be on holiday blogging routine - about twice a week rather than thrice - and the topics may reflect the holiday spirit.
First up, there have been quite a few reviews of The Green Executive since its publication, so I thought I'd do a quick round up.
"The Green Executive is an essential book for those who want a leadership view of how to make a business sustainable, from how to address the risks to how to exploit the opportunities. The book is nicely populated with models, frameworks and ways to advance, and is pitched exactly right to make it interesting without getting bogged down in academic texts. Using tools that include Gareth Kane's Sustainability Maturity Model or his summary of new and emerging green markets, green executives may just become a mainstream feature of business."
"...in his lively new book The Green Executive, a well written manual designed to help business leaders improve the environmental impact of their company."
"But it doesn't have to be this way, argues Kane in his well-informed and public-spirited new book. Why not, instead of tinkering around the edges of sustainability, go the whole hog and make it a pillar of your corporate DNA? There are, as he explains, sound commercial reasons for following this track."
"only a few books really stand out from the crowd... One of those outstanding books comes from Gareth Kane... Sustainability leadership – what CEOs and business leaders need to know in terms of sustainability, is aptly summarized in Gareth’s new book The Green Executive."
After years of sitting on the fence, the UK's Daily Mail has lurched towards the views of the climate denialists, particularly when it comes to green taxation. According to Nicholas Schoon of the ENDS Report this followed a lunch between the editor Paul Dacre and Nigel 'just saying' Lawson.
But, as Bob Ward of the Grantham Institute pointed out in a tweet this week, the website of DMGT, owner of the Daily Mail, gives a quite different impression:
At DMGT, we know that to be successful in today's world, we need to respond appropriately to global challenges such as climate change, environmental damage and social and ethical issues. To us corporate responsibility (CR) and sustainability require that we manage our businesses and brands responsibly for the long-term success of our Group and the communities we serve.
Rupert Murdoch's News Corporation owns the spiritual home of climate change denial, Fox News, and the almost-as-hardline The Australian, but the old tycoon is on record as saying:
Climate change poses clear, catastrophic threats. We may not agree on the extent, but we certainly can't afford the risk of inaction.
We can set an example, and we can reach our audiences. Our audience's carbon footprint is 10,000 times bigger than ours. That's the carbon footprint we want to conquer.
Becoming carbon neutral is only the beginning. The climate problem will not be solved by one company reducing its emissions to zero, and it won't be solved by one government acting alone. The climate problem will not be solved without mass participation by the general public in countries around the globe.
Uh? If cognitive dissonance could kill, I would drop stone dead.
I uncovered a similar dichotomy when I challenged an executive from our local press. She had been boasting about the group's admirable "Go Green" campaign so I asked her how she squared that with their papers' anti-wind turbine and anti-airline tax stances. She didn't seem to understand that CSR could extend to the choice of words of reporters, sub-editors and columnists to the issues concerned, and just flannelled.
It's a big question - can media organisations claim to be responsible if they are taking an "irresponsible" editorial line?
To twist the old maxim, is it a case of "do as I do, not as I say"?
I still hear people trot out the old line that the sole responsibility of a business is to act in the best interests of its shareholders - by which they usually mean maximising short term profits at the expense of all else. Here in the UK, at least, this isn't exactly true. In the 2006 Companies Act, directors' duties are defined as:
S172 Duty to promote the success of the company
(1) A director of a company must act in the way he considers, in good faith, would be most likely to promote the success of the company for the benefit of its members [ie shareholders] as a whole, and in doing so have regard (amongst other matters) to—
(a) the likely consequences of any decision in the long term,
(b) the interests of the company’s employees,
(c) the need to foster the company’s business relationships with suppliers, customers and others,
(d) the impact of the company’s operations on the community and the environment,
(e) the desirability of the company maintaining a reputation for high standards of business conduct, and
(f) the need to act fairly as between members of the company.
[Emphases are mine]
In other words company directors are obliged by law to consider long term issues, employees' welfare, communities, the environment and the company's own reputation when making decisions.
I was delighted at the weekend to be sent this amazing picture by Melvin Redeker of him reading The Green Executive while on a kayaking trip around the North Sea island of Noss. Melvin is a business speaker and photographer who has mission to reconnect business with the natural world - you should check out his website here for the wonderful pictures if nothing else.
Well this got me thinking, what makes someone pick up a business book like The Green Executive after a hard day's paddling in the open sea? Well the simple answer is that I packed the book full of stories.
When I started the book I didn't want to regurgitate the same old case studies over again, so I interviewed 18 senior managers/directors charged with transforming their business. These interviews took on a life of their own, so I included a transcript at the end of each chapter as a short intermission called "The View from the Front Line". I found the stories were inspirational - somehow we managed to duck their PR machines' blue pencil of death and got some really personal insights and anecdotes. Virtually all the feedback on the book - reviews and on Amazon - has lauded the interviews.
None of this is surprising - humankind has always revered the story. Very few of us would willingly wade through a book of stats, equations and mathematical proofs, but whole industries depend on stories, from the Take A Break style magazine through to blockbuster movies.
So how can you use storytelling in your green communications? In exactly the same way I used it in the book - sprinkle anecdotes and personal stories through your reports, websites and other publications. One of the interviewees from the book, Julie Parr of lawyers Muckle LLP, used a story of how one partner was taking waste paper away to use as horse bedding in their in house magazine. OK, it's not the most exciting thing they are doing if you are a sustainability geek like me, but for the rest of the world (the people we need to communicate with) it the story is far more engaging than a bar chart or a picture of hands cupping a sapling.
It's hard not to feel a bit of schadenfreude over the plight of the News of the World ex-editor now News International bigwig Rebekah Brooks after the latest round of allegations regarding phone hacking. When the story was about invading the privacy of the rich and famous, only a few people cared. Now it seems it was routine to hack into the phones of the victims of terrible crimes and their families - the very people the sanctimonious NOTW claimed to stand up for - and the public have rightly been outraged.
While I usually restrict my posts here to the environmental rather than the ethical elements of Corporate Social Responsibility (CSR), there are many elements of the story you can read across:
1. Hypocrisy kills trust. NOTW's invasion of privacy of those they claimed to represent is the killer story here. Likewise when BP claimed to be going "Beyond Petroleum" then didn't, they were held up to ridicule.
2. The buck stops at the top. Brooks' claim that it was "inconceivable" that she knew that this was going on holds little water. If she didn't know, she should have - implicated or incompetent? Tony Hayward of BP showed a similar lack of personal accountability during last year's oil spill and became a international figure of ridicule - "I want my life back!" before he was shown the door.
3. Brand protection is everything. While the NOTW can no doubt take a short term hit in terms of sales, the real damage will come from advertisers taking their trade elsewhere. Ford have announced they will do so and a number of others are considering their position, urged on by a social media campaign. NOTW is contaminated - the others don't want cross contamination of their brand. This is similar to how a huge number of top brands have blacklisted Asia Pulp & Paper over rainforest destruction.
4. These things don't go away - the phone hacking occurred 6-9 years ago. Likewise the Indian courts are still pursuing those responsible for the 1984 Bhopal disaster, jailing several people last year. "Getting away with it" is a long term job.
My advice to News International? Eat humble pie and Brooks at least should fall on her sword. That might give them a chance to claw back some trust.
During the Business of Sustainability sessions last week I was asked about the green executives I had interviewed for my book, The Green Executive - were they doing what they were doing because they felt it was the morally correct thing to do, or was it because it was just good business sense?
The answer of course is "both" - they were passionate about their values AND it was good for the business.
But the reality is a bit more subtle than that. The executives were almost all highly passionate about doing the right thing, but they were astute enough to realise that if what they proposed wasn't good for the business then it wouldn't be sustainable in the small 's' meaning of the word. A dose of healthy business pragmatism was required.
In other words there is a "sustainability sweet spot" where personal passion for the planet and business acumen overlap - see my Venn diagram below.
If you are passionate about the planet, but ignore the business case, then either you will be ignored yourself or ultimately you will damage your business (or organisation). On the other hand, if you are only coming to sustainability from a purely business point of view you will probably lack the vision and perseverance to deliver real change. If you hit the sweet spot then you are a true Green Executive - and this is what sets the guys I interviewed for the book apart from the also-rans.
I blog to share ideas, refine my thinking and, yes, help market the business - but mainly because I enjoy it. But the wider PR world sees bloggers in a strange way.
I get bombarded with extraordinarily banal press releases - and no, I'm not going to regurgitate BigShedSupermarket's incremental achievements in reducing packaging just because you've put me on your mailing list. Engaging with social media this is not.
I get people ringing asking me if I want to "outsource my thought leadership." Uh? How is that even possible?
And occasionally I get offered cash to mention a product in my blogs. The last one even asked me how much I would charge to include a reference to an unspecified product. Reader, I'm sorry to say I sold out. I asked for a gazillion pounds. I'm still waiting for a reply.
Integrity. Doing what you say you will do. Putting your cards on the table. Being trustworthy. It's not really that difficult. If you are forced to compromise on a promise, 'fess up and explain why. Don't try to brave it out - because integrity's easily lost. And how can you claim environmental and/or social responsibility if you don't have integrity?
Today is the official publication date of my second book, The Green Executive. Needless to say, I'm extremely excited and proud - the book was started over two years ago it took a huge amount of effort to get the 76,000-odd words down and into the right order.
The central premise of the book is that 'green' is shifting out of its environmental management silo and onto the boardroom table. Survey after survey has shown that executives understand that it is a priority, but don't feel adequately equipped to deal with it. The Green Executive was written to bridge that gap.
The book has four sections:
1. The Business Case for Sustainability: doing nothing is not an option, the case for action, the moral case and green business risks.
2. Context: global problems, global solutions and the green economy.
3. Practical Action: ranging from sponsoring R&D through to redesigning your business model.
4. Making It Happen: integrating sustainability, leadership, strategy, engaging stakeholders, management processes.
At the end of each of the 18 chapters is a short interview with a leading practitioner in corporate sustainability - the big company names include Marks & Spencer, GlaxoSmithKline, Canon, National Express, Procter & Gamble and Arup, plus a huge range of others.
If you want some free extracts and some other goodies, then check out May's special edition of The Low Carbon Agenda.
It was 31 September last year that I submitted the manuscript for my second book The Green Executive. Last night I finally submitted the final comments on the final proofs (just 9 typos!) and the glowing endorsements from the great and the good eg:
"If you want to become a green business leader, this book is essential reading. Gareth Kane makes the business case most persuasively. This is a brilliant book full of practical advice showing the benefits of thinking beyond mere compliance." Lord Shipley of Gosforth, OBE
Writing a book is a huge undertaking, but this last phase is undoubtedly the most frustrating because you just want to see it out there and there's all this practical stuff to do. Anyway, to celebrate this little milestone (and help keep me sane), here's a short extract from the chapter on creating new business models.
BTW: The book is out on 20 May, but you can pre-order The Green Executive now from Earthscan or Amazon. If you want a 20% discount and some other goodies, then make sure you subscribe to The Low Carbon Agenda before 12 May.
Replacing Products with Information
The product-service concept still includes a product, but one that is leased as part of a wider service. The next step is to remove the physical product altogether, by shifting from atoms to bytes. As we have seen, the digital economy gives a huge opportunity for such dematerialization, in the process saving up to five times the carbon that it uses, but also eliminating raw material use and the need for hazardous materials in product production. Examples include:
Apple’s iTunes sells music in an MP3 format without that music ever becoming embedded in a physical object such as a vinyl record or a CD;
Most cable TV companies now offer ‘movies on demand’ – the entertainment is provided without becoming a physical product such as a video tape or DVD;
eBooks give you the information stored in a book without the paper, card and glue. On Christmas Day 2009, eBooks outsold paper books on Amazon.com for the first time;
Digital cameras remove the need to produce and distribute film and processing prints and slides. The user decides which pictures, if any, are worth printing. This eliminates materials for the film itself, photographic paper and hazardous printing chemicals;
Smartphones and downloadable Apps are allowing users to buy many functions without purchasing new products. For example, the interviews in this book were recorded using an iPhone App, iTalk, rather than a physical Dictaphone.
The nature of the digital economy means that many of the risks we saw in product-service systems are minimized for digital products. Investment in capital is minimal and many modern physical products (CDs, DVDs, books) go through a digital stage in any case, so the digital product has little or no marginal cost to produce. Customer pull is strong given the hip image of the digital product (for example Apple products), the emergence of the portable multi-functional digital lifestyle device (iPhone and iPad) and the undoubted convenience of purchasing by downloading.
It was the big fuss in the Corporate Social Responsibility field last year. Your flashy iPad had the blood of Chinese workers on it. The factory where they were made was a suicide hotspot because of the terrible working conditions and you should feel guilty, Apple should feel guilty, the whole world should hang its collective head in remorse. I know people who chose not to buy Apple as a result.
At the time, I felt that Apple were hard done by as the company concerned, Foxconn, produced goods for many other household names, including Sony, Dell and Motorola. Now it appears, according to Wired magazine, the whole scandal was a non-event. Yes, sadly, 17 workers took their own lives, but out of a workforce of 1 million. That puts the Foxconn suicide rate lower than the average for all of China, and four times less than that of US college students. Working conditions at Foxconn still seem severe by Western standards, but if you work there, you're at a lower risk of killing yourself than your peers. Apple does appear to have been the victim of journos hungry for a negative story about the iPad.
Here's some things we can learn from the story:
The old political/journalism trope "never let the facts get in the way of a good story" still applies;
Bad news travels much, much quicker than good news (and nobody's interested in debunking a 'good story');
Never believe the scandals that rip across Twitter, blogs or the media - check the facts;
Tall poppies like Apple are always at risk of negative stories, fair or foul.
Damage limitation is just that.
The only way to balance this kind of lazy journalism/bloggareah is to strive for the highest standards, have the facts ready to defend the brand and have a steady stream of positive CSR news hitting the ether. In the meantime, I can use my Apple gear with renewed smugness.
In these days of Twitter, Facebook and 24hour news, reputations can be blasted out of the water in a second. Sky TV presenters Andy Gray and Richard Keys' sexist rant against female football officials and executives spread like wildfire across the web, the print and the broadcast media in a couple of hours. As myriad politicians, celebrities and businesses can attest, it only takes one little aside to ruin a career.
Likewise, there is no doubt that brand protection is a key driver for corporate social responsibility (CSR). Apple, BP and Hewlett Packard have all been caught up in scandals of quite different types in the last year, and the swiftest reparative action can never quite remove the whiff of wrongdoing. The key is preventative action - creating the culture and systems that prevent casual sexism, racism, supply chain worker exploitation, pollution incident or habitat destruction raising their ugly heads. Because as Gray and Keys (and their employer) now know, it doesn't matter how safe you think you are, chances are someone will find you out.
I was watching BBC's Daily Politics on Monday to catch the latest on the RBS bonus affair that I had just blogged on, and, lo, there was an item on responsible capitalism. They focussed on B&Q, an excellent example of responsible business, but fell into the old trap of thinking the scope of corporate social responsibility begins and ends with supporting the local community. But then, in the interests of balance, up popped a chap from the Adam Smith Institute to declare that CSR was "a tax on the consumer."
