Leadership, Corporate Social Responsibility and Sustainability, Part 3: Strategy Focus

Early corporate citizenship initiatives were often directed at supporting commu­nity causes ranging from charitable organizations to cultural institutions like municipal symphonies and operas. Companies have been historically helpful in developing the cultural infrastructure of many communities. Whether these cor­porate philanthropy efforts were beneficial to the company or only to selected individuals is very subjective. However, many of these early efforts were not scrutinized for their contribution to the strategic objectives of the firm. Michael E. Porter and Mark R. Kramer have argued that a company needs to choose its social initiatives strategically. They have advanced the concept of shared value, which they define as “policies and operating practices that enhance the competi­tiveness of a company while simultaneously advancing the economic and social conditions in the communities in which it operates. Shared value creation focuses on identifying and expanding the connections between societal and eco­nomic programs.”

Porter and Kramer identify three approaches that apply to international marketers:

(1) delivering attractive products that are truly beneficial to society; (2) removing problems in the supply chain that are both costly and socially detrimental, such as reducing. greenhouse gasses; and (3) enabling local cluster development to help communities become more competitive.

They argue that “we need a more sophisticated form of capitalism, one imbued with a social purpose. But that purpose should arise not out of charity but out of a deeper understanding of competition and economic value creation.” The best interna­tional marketers are driven by the desire to create value and improve their com­petitive positions, so shared value becomes the right and smart thing to do.

GLOBAL CONSUMERISM AND SUSTAINABILITY

Between 1980 and 2010, the middle class worldwide nearly doubled in size, growing to almost 2 billion people. By the year 2030, it is likely to reach nearly 5 billion people. The middle class is the largest group, demographically, in terms of consumers of various products and services. However, growth of the middle class poses pressures on the natural environment and demand for resources, such as energy, food, and raw materials. Rising world population and increased production and consumption raise concerns about sustainability, which refers to meeting humanity’s needs without harming future generations.  On the one hand, rising consumerism is a sign that living standards are improving worldwide; billions of people are emerging from the poverty that besets humanity.  On the other hand, growing population and consumerism pose important challenges to planetary well-being.

The World Economic Forum has proposed various ideas for addressing sustainability, while ensuring people can obtain the products and services they need:
1. Emphasizing durable over disposable. Firms and consumers alike benefit from products that are relatively durable, as opposed to disposable goods that use more resources and fill up landfills.

2. Using renewable versus disappearing resources. Renewable resources are usually more cost-effective and encourage sustainability. For example, energy generated from solar and wind sources can be maintained indefinitely, while fossil fuels are dwindling over time.
3. Sharing resources. Firms and consumers must think increasingly about developing and using goods that they share with others. For example, homeowners tend to use lawnmowers, snowblowers, and other home-care equipment only intermittently. Economies result when such resources are shared among several households.

4. Favoring virtual products and delivery methods.  Online product vendors use resources more efficiently than physical, “brick-and-mortar” retailers. Some products can be offered electronically, which saves paper. For example, many consumers opt for digital books they can read on Kindles, Ipads, and similar devices. Such approaches help reduce the destruction of forests and other resources.

5. Consuming locally grown goods. Many agricultural products must be transported long distances, which contributes to air pollution and needless resource usage. An emphasis on consuming locally-grown farm products can help increase resource sustainability and decrease pollution.

To thrive while preserving natural resources, companies will need to include sustainability in their strategy-making. Managers need to improve their understanding of how resources create new risks, but also produce new opportunities.  Firms must devise sophisticated approaches for conserving resources and offering sustainable products and services.

For example, Otis makes the Gen2 elevator, which uses up to 75 percent less energy than conventional elevators.  Recently, Otis established a green manufacturing facility to produce Gen2’s in Tianjin, China, which reduced site energy use by more than 25 percent. Builders are adopting Gen2 elevators and escalators, to save energy and help the environment. The Dutch consumer products company Unilever is cutting water usage and greenhouse gas emissions in its factories. The firm aims to increase recycling and recovery efforts in manufacturing, and reduce by one-third the use of materials in its product packaging by 2020. The Swiss food company Nestlé works with farmers around the world to help them increase crop yields, while minimizing their water usage and pollution. Nestlé has allied with nongovernmental organizations such as the Rainforest Alliance to focus on how farmers can improve access to clean water and sanitation.

Sources: Business & the Environment, “Food and Beverage Companies Serve Up Sustainability,” October 2011, pp. 1-3; Richard Dobbs, Jeremy Oppenheim, and Fraser Thompson, “Mobilizing for a Resource Revolution,” Mckinsey Quarterly, January 2012, accessed at www.mckinseyquarterly.com; World Economic Forum, Consumer Industry Emerging Trends and Issues (Geneva, Switzerland: World Economic Forum, 2011), accessed at www.weforum.org

The Next Generation Needs Vision and Commitment

Source: World Economic Forum

April 18, 2012 marks the end of the World Economic Forum on Latin America 2012 in Puerto Vallarta, Mexico. It concluded with a call to end “archaic thinking, outdated notions of hierarchy and the lack of dedication to excellence in education,” while promoting a “commitment to education, inclusion, social responsibility and sustainable growth” amongst young leaders.

For Latin American businesses to thrive in the global economy and in environments where there is distrust or even hostility towards private enterprise, they must be solidly focused on engaging stakeholders and incorporating the communities in which they operate into their business models. With Latin American student performing poorly in educational benchmarking assessment, the importance of raising the quality of education amongst these countries was made. In addition, the role of the Internet, social media and other communications technology was strongly emphasized. They are means that are becoming essential for stakeholder engagement and for creating conversations between people.

For more information about the meeting, please visit:www.weforum.org/latinamerica2012.
Source:http://www.weforum.org/news/next-generation-latin-american-leaders-needs-vision-and-commitment

Answer to International Business Jeopardy Question from 7/21

Where is the world’s largest tropical coral-reef complex?

The greatest reef of all is Australia’s Great Barrier Reef, which extends more than1,300 miles along the continent’s Pacific Coast. This is only a third of the length of the Great Wall of China, but impressive enough when you consider its massive bulk– 80,900 square miles– its 400 species of coral, and 6,500 species of fish.

Creating Green Logistics

Product retrieval is no longer limited to unwanted products sent back to the seller or bottle returns for recycling. As interest in recycling continues to grow, global companies will need systems that allow for retrieving and disposing of long-term capital goods such as cars, refrigerators, air conditioners, and industrial goods. Governments are starting to establish rules related to product retrieval that outside marketers will need to tune in to. Germany, for example, requires car manufacturers to take back their used vehicles for dismantling and recycling. The design of such long-term systems worldwide could end up being one of the key challenges and opportunities for logistics specialists.

Global businesses will also need to be environmentally responsible in other ways, always working to reduce their carbon footprints. This is necessary not only because it will protect the environment from further destruction, but also because consumers will demand it. There is an international tidal wave of change as individuals, corporations,and governments look for ways to function in more “green” ways. The impact on marketers, whether changes are voluntary or mandated, will be significant for some. Packaging will change, as buyers reject wasteful containers used solely for aesthetics rather than product protection or as manufacturers opt for materials that can be recycled after use.

This is an excerpt from Dr. Czinkota’s book Global Business: Positioning Ventures Ahead, co-authored by Dr. Ilkka Ronkainen.

Michael R Czinkota and Ilkka A Ronkainen, Global Business: Positioning Ventures Ahead (New York: Routledge, 2011), pg. 85-86.