The CSR 2.0 Principle of Scalability - The Limits of Ethical Consumerism

What makes Wal-Mart such a good example of scalability is not just its size, but the principles underlying its actions, such as mainstreaming sustainability, measuring total impacts, empowering customers, working with suppliers and setting audacious goals. The lesson of history is that the ‘ethical consumer’ is the enemy of progress!

That may seem like a crazy thing to say, but here is why I say it. Simply put, by creating a premium-priced, niche market for ‘ethical consumption’ (whether it be organic, fairtrade or eco-friendly), companies have been able to present a responsible front to the world, while leaving the vast majority of their products – which are, by implication, less than ethical – unquestioned and unchanged. At the same time, a small group of usually well-to-do Western consumers have been able to ease their conscience by feeling that they are making a positive difference.

Now let me be clear. I am not against organic or fairtrade or ecofriendly products per se. That would be insane. Clearly, there are groups of producers – usually poor farmers in the Third World – that have benefited from these initiatives. What I am against is the voluntary nature and premium pricing of sustainable and responsible products. The combination of these two factors has ensured that, with one or two exceptions, these products have never gone to scale. As compared with the total and ongoing impacts of mainstream shopping habits, ethical consumption, laudable as it is, has remained marginal at best and totally insignificant at worst.

Let’s look at some of the facts. The UK Soil Associate launched the world’s first organic standard in 1967 and Germany launched its Blue Angel eco-label in 1978. The first fairtrade coffee, introduced by the Max Havelaar Foundation, was in 1988, and the Rainforest Alliance launched its SmartWood certification in 1989. So we have had more than 40 years of ethical consumption. And where has that left us? Well, certainly, it is a growing trend. In the UK, where the proportion of ethical consumers is among the highest in the world, a survey of 4,000 consumers by PwC found that shoppers buying Fairtrade products rose from 20% in 2005 to 50% in 2008 and organic food purchasing increased from 22% to 43% over the same period.

However, this £300bn sector accounted for just 4% of the UK retail market in 2008 and only 60% of basic grocery products had sustainable alternatives, falling to 40% for some sub categories, such as clothing and non-food items. According to the PwC survey, the high prices associated with fairtrade and organic products remained the main inhibitor to further growth. On average, the price premium for environmentally and ethically-friendly products – taken across 75 items at the UK's top six grocers – was 45%. Almost 50% of those shoppers surveyed said they were unwilling or unable to pay this premium, claiming that on average they were not willing to pay a premium in excess of 20% for greener alternatives.

How then do we explain polls, like the one done in 2009 by the Fairtrade Labelling Organisation among 14,500 people across 15 countries, which found that more than half said they were ‘active ethical consumers’? Well, as all professional market researchers will tell you, these figures are horribly skewed due to what’s called the ‘socially acceptable response bias’. You are basically asking people if they are ethical, or if they care about poor farmers in the Third World, or if they are okay with trashing the planet. What would you answer? The simple fact is that, as he UK’s Sustainable Consumption Roundtable says, ‘we know that there is a considerable gap – the so-called ‘value-action gap – between people’s attitudes, which are often pro-environmental, and their everyday behaviours.’

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This is an extract from Chapter 8 of The Age of Responsibility: CSR 2.0 and the New DNA of Business. For more information and ongoing updates, follow the The Age of Responsibility Blog

Copyright 2011 Wayne Visser

Prof Andrew Crane on "The Age of Responsibility"

The Age of Responsibility provides a much-needed wake up call for the corporate responsibility movement. This highly readable account of where CSR has gone wrong and where it needs to go next is essential reading for anyone interested in the role business can play in creating a just and sustainable society. This is the best CSR book you'll read all year.

Andrew Crane, George R. Gardiner Professor of Business Ethics at Schulich School of Business, York University and author of Business Ethics

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The Age of Responsibility: CSR 2.0 and the New DNA of Business, by Wayne Visser is available from Amazon.co.uk, Amazon.com and other leading book retailers (ISBN-10: 0470688572, ISBN-13: 978-0470688571).

A fine and fascinating book (5-Star Amazon Review)

By Dr Mike, 1 April 2011

(UK)

I have read quite a lot about the recent financial collapse and feared that this would be yet another overview and analysis of these events. However, I was pleased to find that it was much more than that.

The first part of the book is a summary of various ways that firms conduct themselves. the author sees these as evolutionary stages, but whether or not you agree with that is irrelevant, because you can read without that assumption.

Stage one is Greed. The firm works solely for its own profit, and this is justified by the trickle-down theory of wealth, which, from the examples given, appears not to be working too well. There are some obscene case studies here, such as Barings, Enron, Lehman Brothers, WorldCom and even the Dutch East India Company. Although executive greed is generally mentioned here, the same greed pervades the whole company structure, financial markets and banking too.

Stage two is Philanthropy, and is exemplified by Carnegie, Rockefeller, Buffet and Bill Gates giving most of their personal fortunes back to society. This exemplifies the trickle-down theory of wealth, but is at the cost of what their companies have done to society and the environment in the first place. Also, of course, too few companies or individuals do what Gates has done: most hang on to their wealth or distribute it only to their higher ranking employees.

Stage three is Marketing. One has only to look at oil, gas and tobacco to see examples "greenwashing" the worst exploits of a company to make it appear that all is well and good. Lobbying is the primary tool used.

Stage four is Management. Cadbury is an example of a firm that put welfare and sustainability at the forefront and to challenge the supremacy of shareholders in governing the direction a firm takes.

Stage five is Responsibility. Here a company tries to build sustainability into itself, as in Interface.

The author then builds a new model for Corporate Sustainable Responsibility (CSR 2.0) which builds on the mistakes inherent in the original CSR (CSR 1.0). This uses ideas such as Creativity, Scalability, Responsiveness, Glocality (think global, act local) and Circularity.

The whole book is buzzing with ideas, and would be worth buying just for the ten case histories examined in detail. Whether you are a die-hard capitalist or communist you will, I think, get a lot out of reading this book. It is all too easy to distort the message of capitalism and over simplify the issues of wealth distribution, pollution and sustainability into the mantra "capitalism works". Yes, it creates wealth, but society has to moderate its worst excesses just as it needs to do that for any individual in society. After all, a company has rights, by law, and should therefore have responsibilities too.

This is one of the best books I have read in the past year. Thoroughly recommended!

The CSR 2.0 Principle of Creativity - Stagnation through Standardisation

In contrast to the social entrepreneurial story of Anurag Gupta and A Little World of India, one of the great dangers of the Age of Management – especially its focus on standardisation – is that it does not foster the kind of creativity that is needed to solve the complex social, environmental and ethical problems that we face. The reasons are fairly obvious. First, an incremental approach, in which companies voluntarily set their own CSR-related objectives, does not tend to create the kind of stretch targets that incubate innovation. Second, standardisation is by its very nature a compliance-based approach, with systems, procedures, measures and audits. As a result, those running on the standards treadmill develop a tick-box mentality, rather than thinking outside the box.

Here’s an example of how it happens in practice. A colleague of mine works in CSR at one of the production plants of a multinational pharmaceutical company. When I interviewed him in 2008, he was deeply disappointed by the conservative, compliance-driven approach of their international head of environment, health and safety (EHS): ‘There was quite a level of frustration for me when we had the top EHS guy come out [from America] and visit the site. We were actually training The Natural Step to shop floor guys, and we were quite excited that he would take this thing on, and he had the power to change the whole way the corporation thinks. … [Well], he obviously had a very different take on it [and] the approach that has been taken in the company has very much on the surface been the legal type ISO approach.’

Sometimes the standards themselves are (perhaps unwittingly) to blame. For instance, when the Global Reporting Initiative (GRI) launched its G3 Sustainability Reporting Guidelines, they included Application Levels which are intended to ‘communicate to the readers of your report to what extent the G3 Guidelines have been utilized in your sustainability report. They are intended to provide GRI reporters with a pathway in which they can continuously improve their reporting. There are 3 Application Levels: A, B and C. These levels can be self-declared, third-party-checked and/or GRI-checked and each with the option of recognizing external assurance (“+”).’ So far, so good. The problem is that, because the levels are directly related to the number of indicators reported (more indicators equal a higher rating), many companies have slavishly reported on many irrelevant or marginal issues, despite GRI’s request that they use the levels ‘with due regard to the Materiality Principle’.

In such compliance-driven environments, incentivised by CSR standardisation, two things typically happen. Most managers will go strictly by the book – whatever the letter of the standard dictates – without experimentation, without pushing the envelope and hence with less likelihood of making mistakes. After all, measurement, auditing and reporting are widely perceived, if we are honest, as a kind of punishment for mistakes. The other thing that happens is that managers become creative about how to trick the system. If the standard calls for continuous improvement on pollution reduction and pollution has gone up, then why not report it in terms of unit of production so that it appears to have gone down? If a multinational supply chain auditor requires SA 8000 compliance, why not run two factories: one ‘model site’ for the international auditors to check, and one without labour controls to supply the mass market? What the Age of Management does, therefore, is at best stifle creativity and at worst foster perverse creativity.

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This is an extract from Chapter 7 of The Age of Responsibility: CSR 2.0 and the New DNA of Business. For more information and ongoing updates, follow the The Age of Responsibility Blog

Copyright 2011 Wayne Visser

Willie Cheng on "The Age of Responsibility"

An authoritative tome on the CSR movement. It provides a comprehensive framework to understand the various stages of (and motivations for) CSR in organizations and the economy to date, and a clear vision of what a truly sustainable and responsible tomorrow entails. This is an eminently well-researched and well-structured book that flows coherently with deep insights and valuable vignettes.

Willie Cheng, author of Doing Good Well: What does (and does not) make sense in the nonprofit world.

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The Age of Responsibility: CSR 2.0 and the New DNA of Business, by Wayne Visser is available from Amazon.co.uk, Amazon.com and other leading book retailers (ISBN-10: 0470688572, ISBN-13: 978-0470688571).