Leadership, Corporate Social Responsibility and Sustainability, Part 6: Sustainable Practices

Irrespective of the many disagreements that exist in relation to the green move­ment, many large international marketers have realized that sustainable practices can make good business sense. Reduced emissions are often directly related to lower fuel costs and increased opera­tional efficiency. Leading global companies are seeing strategic value in making sustainability a corporate imperative. A 2011 McKinsey survey of companies found  that a handful of companies are capturing significant value by systematically pursuing the opportunities sustainability offers. We believe the trend is clear: more businesses will have to take a long-term strategic view of sustainability and build it into the key value creation levers that drive returns on capital, growth and risk management as well as the key organizational elements that support the levers. Each company’s path to capturing value from sustainability will be unique, but these underlying elements can serve as a universal point from which to get started.

Green practices will become increasingly important as society expects more.  The Coca Cola Company provides a good example of the sustainability prac­tices of leading  international  marketers. Coca Cola identified its priority areas for improving sustainability as water stewardship, energy efficiency and climate protection, sustainable packaging, and healthy communities. One can see how these areas are important to the company and the communities it serves by envi­sioning the amount of water and agricultural  products used in Coca Cola pro­ducts; the energy usage and climate impact involved  in  bottling, refrigerating, and distributing its products;  and the relationship of its products to  the health and wellness of its customers. Water stewardship is particularly important to  the company because Coca Cola uses massive amounts of water in its products and operations. Water is vital to its long-term success as a company.  It has been challenged over its water usage practices in some parts of the world. In response, Coca Cola believes that, while it may  be  successful  in  securing  the  legal  rights  to  securing water  rights,  it must seek a  “social license” as well: For  us to do business—and to be part  of the solutions  addressing water  stress—it is essential to secure the trust and goodwill of the people in the communities where we are located. And that can only come from candid, continual dialogue -an ongoing conversation in which we show residents how much water we are using and how we are using it. It comes from telling residents how we are managing water resources and what we are doing to improve them. And it comes from helping to address resi­dents’ specific concerns about water.

Leadership, Corporate Social Responsibility and Sustainability, Part 5: Sustainability


Just like the broader term of corporate social responsibility, sustainability also carries multiple meanings to different audiences. Inevitably, groups and organizations that are interested in specific issues related to the environment tend to define the issue in narrow  terms. It is helpful to understand the term in its most general sense, which often involves some sense of marrying commercial needs  with preserving the natural environment for the future. Several  definitions can help. The 1986 World Commission on Environment and Development (Brundt­ land Commission) definition of sustainable development could reasonably be applied to sustainable business practices: “development that meets the needs of  the present without compromising the ability of future generations to meet their own needs.” A simple but powerful expression is that of Robert Gillman: “do unto  future generations  as you would  have them  do unto you.”

Several  definitions can help. The1986 World Commission on Environment and Development (Brundt­ land Commission) definition of sustainable development could reasonably be applied to sustainable business practices: “development that meets the needs of the present without compromising the ability of future generations to meet their own needs.”  A simple but powerful expression is that of Robert Gillman: “do unto  future generations  as you would  have them do unto you.”

Growing  population, increased urbanization and industrialization  around the world, and dramatic increases in production and consumption all have a sig­nificant impact upon the environment. The result has led to increased pressures from nongovernmental organizations and multilateral institutions to create greater awareness and to improve practices by governments, businesses, and individuals to lessen the detrimental impact. This involvement sometimes raises political and philosophical disagreements in regard to  the extent of problems and the nature of the proposed solutions. An example of this is the 1997 Kyoto Protocol, an international agreement linked to the United Nations Framework Convention on Climate Change. This agreement sets binding targets for industrialized countries and the European Community for reducing national  levels of greenhouse gas emissions. The United States declined to join this agreement because it excludes major developing economies like China, India, and Brazil, which are also major greenhouse gas emitters.

Controversy continues over whether these greenhouse gases  are causing  climate change or global warming. Within individual nations,  political disagree­ments over the wisdom and necessity of “green” policies and practices often show varying opinions about whether “green is good.” For example, the EU announced a carbon emissions tax on all airlines flying  into Europe. This ruling has raised protests from the U.S., Indian, Russian, and  Chinese governments and those of other countries as well. In another example, U.S. and European regulations that set new standards for the amount of light emitted per watt of power used effectively require the use of compact fluorescent bulbs and make incandescent light bulbs obsolete. Subsequently, concerns have emerged about mercury content in the new bulbs and how to dispose of them, as well as whether they are as effective in illumination. As a result, some people are hoard­ing old lightbulbs. Similar issues and a secondary market in old toilets have resulted  from regulations  on  low-flow  toilets  to save water.

International marketers will need to pay attention to multiple regulations governing the environmental impact of products. The EU has implemented REACH (Registration, Evaluation, Authorization, and Restriction of Chemical substances), a set of broad-reaching regulations on the use of chemicals, to motivate businesses to exclude dangerous chemicals like cadmium  in products  such as personal computers and cell phones.

Where problems exist, business opportunities may exist as well. As we have outlined in this chapter, companies like  IBM,  GE, and  Siemens are  adjusting their corporate strategies and their product offerings to address some of the planet’s environmental challenges and governmental plans to tackle them. In President Obama’s 2011 State of the Union address, he called for the United States to generate 80 percent of its electricity from clean energy sources by 2035. Depending upon the evolving definition of “clean energy,” this goal may mean good opportunity for companies that have products and services in renew­able energies, nuclear power, efficient natural  gas,  coal  with  carbon  capture and sequestration, wind power, and solar energy. Some businesses objected, contending that the goal was unachievable because of existing regulatory barriers. Business groups and environmental organizations in many countries often clash over various regulations that affect access to energy supplies. Even “clean energy”  can pose  environmental disputes as illustrated by the issues of shale gas drilling and pipelines in the United States and by the movement away from  nuclear  power  in Germany.

Leadership, Corporate Social Responsibility and Sustainability, Part 4: CSR Report

Porter and Kramer distinguish between shared value and corporate social responsibility by claiming that the latter mostly focuses on corporate reputation rather than on directly improving a company’s profitability and competitive posi­tion. This distinction can be misleading. Many companies have certainly used their CSR 血tiatives to build their reputations through marketing communica­tions, but that is not inimical to a strategic approach to CSR. Crucial is the CEO’s commitment to a holistic CSR program. If the CEO takes up the flag in leadership, the company is more likely to rally to the cause and integrate it deeply into the very fabric of the operation. Some deeply committed companies, like GE, reflect this approach by embedding CSR initiatives into their marketing programs as The International Marketplace 1.1 in the opening chapter illustrates.

How companies communicate their involvement and commitment to CSR is very important. Edelman advocates that companies should “practice radical transparency.” This can be done by communicating effectively with various stake­ holder groups, especially employees, about their CSR goals and their progress towards me叫ng them. Enabling employees to take that conversation further with others, individually and through the increasingly important social media channels, can be particularly convincing to other audiences.(See the Edelman report on trust in social media at http://trust.edelman.com/social-media-and -trust.)

The most common means of formal communication is through regular dedicated reports. Most large companies issue annual or periodic reports on their  CSR pactices. The reporting  procedure and the quality  of  the reports  are a good  lens to view the actual commitment of the company to responsibility programs. KPMGhas analyzed the CSR reporting practices of companies. In its ” International Survey of Corporate Responsibility Reporting 2011,” KPMG reported that “while CSR reporting was once seen as fulfilling a moral obligation to society, many companies are now recognizing it as a business imperative. Today , companies are increasingly demonstrating that CSR reporting provides financial value and drives innovation, reflecting the old adage of what gets measured gets managed.”



Leadership, Corporate Social Responsibility and Sustainability, Part 2: Business Responsibility

Corporate social responsibility (CSR) carries different meanings to different audiences. Research has shown that many people are confused by the term. In a 2007 study in the United States by the public relations firm Fleishman Hillard and the National Consumers League, most respondents identified either “commitment to community” or “commitment to employees” as the principal mean­ ing of corporate social responsibility. Other meanings included “responsibility to the environment” and  “providing  quality products.” The study found that American consumers expected corporate commitment to encompass more than just charitable and philanthropic giving and that treating and paying employees well was of prime importance.

Corporate social responsibility is a broad term that includes many specific corporate practices. The European Commission defines it as “a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with stakeholders on a voluntary basis.” The broader meaning of the term is also captured by other expressions used by many corporations and individuals such as corporate citizenship, corporate phi­lanthropy, or sustainability. Corporate citizenship refers to the fact that, historically, many companies have supported their local and national communities through a variety of roles, including support for nonprofit organizations vital to a community’s social development. These associations include board member­ ships, employee volunteer programs, and charitable donations. Another frequently used term, corporate philanthropy, has a narrower context specific to the philanthropic or charitable contributions of a firm. As this chapter will address in a later section under the specific subject of sustainability, CSR also includes a range of issues related to the environmental impact of the firm’s operations and products.

Corporate citizenship practices have been around for centuries. In Augsburg, Germany, the Fuggerei is a Roman Catholic housing settlement for the poor that Jakob Fugger “the Rich” founded in 1520 and that still exists today through the support of the original charitable trust. The 145 residents of the Fuggerei, many of them elderly widows, pay an annual rent of less than 1 euro to live in the quaint community on the condition that they pray for the Fugger family. (Was he hedging his bets?) Fuger was an international marketer and financier who even financed a trade mission to India.

Fugger may be a good example today for international marketers to follow -in combining successful business practices with social responsibility. The International Chamber of Commerce (ICC) defines corporate social responsibility as “the voluntary commitment by business to manage its activities in a responsible way.” The ICC encourages its membership to take initiatives on their own volition that make good sense for their company’s overall strategy. Corporate social responsibility practices are now encouraged by governments and business associations worldwide as The International Marketplace 17.3 describes for the United States. European CSR efforts are also leading examples of the practice. To provide such leadership, CSR Europe was founded in 1998 by business leaders across Europe in cooperation with the European Commission in response to an earlier appeal by commission president Jacques Delors to take a more active role in addressing broader social needs. It now includes 80 multinational companies and 35 national partner organizations with outreach to 4,000 companies across Europe. CSR Europe has launched the Enterprise 2020 initiative to help companies collaborate to develop profitable, innovative businesses practices that lead “the transformation towards a smart, sustainable and inclusive society.” The initiative envisions that the “enterprise of the future “will have societal issues at the heart of its strategy.

The Chambers Ireland present CSR awards annually since 2004 to “recog­nize the work being carried out by Irish and multinational companies to improve the lives of their employees and to enhance the civic environment in which they operate.” The Council of British Chambers of Commerce in Europe, in the spirit of William Wilberforce, who convinced the British Parliament to abolish slavery in the nineteenth century, has created a specific CSR initiative to stop human trafficking through educational programs and other efforts.

There have been efforts by governments to more specifically codify what they expect of companies regarding CSR practices. The ICC warns against this kind of “one-size-fits-all” approach and defends the voluntary nature of CSR: Government’s role is to provide the basic national and international framework of laws and regulations for business operations and that essential role will continue to evolve.

Beyond this, good corporate practice is usually spread most effectively by strong corporate principles and example, rather than by codes of conduct. A commitment to responsible business conduct requires consensus and conviction within a company. Voluntary business principles have the advantage of bridging cultural diversity within enterprises and offering the flexibility to tailor solutions to particular condition s. Voluntary approaches minimize competitive distortions, transaction costs associated with regulatory compliance, and inspire many companies to go beyond the regulatory baseline, thus often eliminating the need for further legislation.

Leadership, Corporate Social Responsibility and Sustainability, Part 1: Introduction

This article was originally published in the book International Marketing by Professor Michael R. Czinkota and Professor Ilkka A. Ronkainen in Georgetown University 2010.

International marketing has never been more important or more powerful. World trade has increased exponentially in the past several decades. The rapid expansion of globalization has been driven by the inclusion of billions of new customers and new competitors in the world marketplace from countries like China, India, and the former Soviet Union, along with revolutionary improvements in communications and transportation, and further economic liberalization. Dramatic growth in disposable income in emerging markets and increasing access to a broad array of media channels allow new audiences much greater access to the many benefits that international marketers offer for a better quality of life.

Yet there are also fears and challenges emanating from the field and its activities. Just like the Roman god Janus, who had two faces and has come to embody the notion of contradiction to modern thinkers, international marketing brings both good and bad to the global marketplace. Exploitation of factory workers by global apparel and footwear marketers in previous decades, or by electronics and computer brands more recently, exemplifies the negative consequences of globalization. While there are operations and management dimensions involved as well, this negative impact is primarily a marketing issue because this discipline interacts closely with customers and suppliers. Unethical and inappropriate actions carry many risks such as negative brand publicity.

The role of global businesses and marketers in the financial crises that began in 2008 has led to public anger and increased scrutiny by society, particularly those who experienced great hardships, as shown in    The international Marketplace 17. 1. Not all markets experienced serious economic setbacks, but some of the poorer nations in the world were profoundly impacted. In its October 2011 “Note on Financial Reform,” the Vatican’s Pontifical Council for Justice and Peace reported,

The costs are extremely onerous for millions in the developed countries, but also and above all for billions in the developing ones. In countries and areas where the most elementary goods like health, food and shelter are still lacking, more than a billion people are forced to survive on an average income of less than a dollar a day. Global economic well-being, traditionally measured by national income and also by levels of capacities, grew during the second half of the twentieth century, to an extent and with a speed never experienced in the history of humankind.

But the inequalities within and between various countries have also grown significantly. While some of the more industrialized and developed countries and economic zones—the ones that are most industrialized and developed—have seen their income grow considerably, other countries have in fact been excluded from the overall improvement of the economy and their situation has even worsened.