Has Tim Hortons given up on sustainability?

"Making a True Difference" has been Tim Hortons' slogan animating its social responsibility and sustainability initiatives over the past few years. But since they were acquired late last year by Brazilian private equity outfit 3G Capital, the owners of the fast food chain Burger King, the true difference seems to be that sustainability is suddenly in rapid decline at the iconic Canadian coffee chain. The new owners, promising to cut costs and improve performance, have effectively closed down the company's sustainability department.

The change has been pretty dramatic. Just last year, the then CEO of the company was saying that their "overall vision for sustainability is to be a leader in the North American quick service restaurant sector and across all sectors in Canada". Already well-known for their community initiatives, the company  had upped its game over recent years in a number of key areas including sustainable sourcing, recycling, energy and water efficiency, animal welfare, nutrition, and disclosure and reporting. As a result it had made it into the Dow Jones Sustainability Index, Corporate Knights magazine's Global 100, the Carbon Disclosure Project's Leadership Index and various other best-of sustainability lists and rankings. The company was far from perfect, but it was clearly making progress.

Since the turn of the year, however, a lot has changed. The new owners have instituted swingeing cuts in personnel in order to institute "efficiencies", just as they did at Burger King a few years ago. As is so often the case, sustainability and responsibility has been one of the first areas to feel the heat. In addition to jettisoning the dedicated sustainability team, the company appears to have also cut the budget for various corporate responsibility initiatives. There's not much sign of a company aiming to be a sustainability leader any longer. Not unless you think Burger King is a leader that is.

So what to make of the changes? The are at least two things worth noting.

First, it seems like the new owners are convinced a lot of Tim Horton's sustainability initiatives were simply not adding value to the company - or at least not to the share price. This is always a major issue for sustainability champions to address, but is typically tricky to prove either way. Still, the swift move to cut the whole department hardly suggests a careful financial evaluation from the new owners either. 3G Capital seem to be operating on gut instinct (or maybe just ideology) much more than evidence when it comes to the financial value of sustainability.

Second, the quick serve market is increasingly being bifurcated into higher end 'gourmet' brands like Chipotle or Starbucks that see sustainability as part of their superior quality proposition to customers and lower end brands like Burger King or KFC that focus more on price and so seek to minimize the costs of sustainability. The new owners probably saw Tim Hortons as somewhat stuck in the middle (much like McDonald's have become), and have elected to head down the low-end route in order to maintain their strategic focus. This certainly makes some sense from the perspective of competitive strategy, and could see the company pulling back from a lot more than just sustainability as it reins in its costs across its operations. If so, we can expect to see simpler menus and a back to basics approach after a recent period of experimentation with higher end fare. However, if this is the way they want to go, you would expect to see more, not less, attention to the costs savings that sustainability initiatives can bring through more efficient resource utilization. As Wal-Mart has shown, sustainability can also very much be part of a low cost strategy.

All told, things don't look for good for sustainability at Tim Hortons. Although some firms can manage sustainability well with just one or two core staff by integrating responsibilities within other parts of the business, Tim Hortons seems to be more intent on stripping it down as far as possible as part of a broader strategic reorientation.  However, there is at least a slither of good news for sustainability enthusiasts in all this. As part of the cutbacks, the new owners have also put the company's private jet up for sale.

Photo by Jeff M For Short. Reproduced under Creative Commons Licence

Top 10 Corporate Responsibility Stories of 2012

This year may have lacked the huge catastrophes that have dominated the corporate responsibility headlines of the last couple of years (such as BP's oil spill in 2010 or TEPCO's nuclear disaster at Fukushima in 2011), but 2012 has probably been more packed with serious incidents than any of the previous years. We had real trouble putting these in any kind of order and even getting down to just a top 10 of big stories was tough  - and meant we had to jettison a few favoured good news stories about corporate responsibility just to be able to capture all of the bad news. So it nearly became the Top 15 Corporate Irresponsibility Stories of 2012. But in keeping with tradition, here's our view of the top 10 of the highlights and lowlights of a jam-packed year of corporate responsibility stories. And if you think we've got it wrong, or want to change up the order a bit, do add your comments below.

1. Apple's supply chain odyssey
If there is one thing that seems to be guaranteed now, it's that the tech giants will be at the forefront of the corporate responsibility agenda for the forseeable future. If nothing else, it's simply a function of their size, power and ubiquity. In 2010 we had Google facing human rights issues in China; last year was Facebook's privacy battles. And this year, Apple's ongoing supply chain issues really exploded into the public consciousness, thanks in part to the New York Times stories that kicked off the year. Worker suicides, factory fires, poor labour conditions - none of this was exactly new, but one way or another 2012 saw Apple take over from Nike (and tech take over apparel) as the poster child of inhumane supply chains. Apple reacted fast once the tide had turned, but for many it was too little, too late. Even their own internal audits provided evidence of widespread breaches of their policy. As the bad news rolled in, the company that so-often seemed immune to criticism started to show signs of serious reform. Instead of secrecy, it started moving towards greater transparency, joined the Fair Labor Association and initiated third party inspections, and now reports monthly on the working hours of over a million workers. In what may turn out to be the most significant move yet, the company has begun manufacturing some of its Macs not in China, but in the US.

2. The LIBOR scandal
2012 was a bad year for a finance sector that seems increasingly incapable of holding onto whatever public trust is left after the financial crisis and its aftermath. Whilst the US regulators' continued clampdown on insider trading gained yet more scalps, most prominently former McKinsey head Rajat Gupta, it was the arcane field of inter-bank lending rates that dominated the financial front pages. Most of us probably didn't even know what a LIBOR was until this year, but revelations of deliberate fixing of interest rates among major banks in Europe during the late 2000s means that we all now know more than we want to. First, the CEO of Barclays was forced to resign in the wake of investigations by UK regulators. Now, the Swiss bank UBS has agreed to pay $1.5bn in fines to the Swiss, UK, and US regulators for manipulation of interest rates that according to Britain’s Financial Service Authority, was so “routine and widespread” that “every LIBOR and EURIBOR submission, in currencies and tenors in which UBS traded during the relevant period, was at risk of having been improperly influenced to benefit derivatives trading positions.” Investigations continue, and it is clear that other banks and possibly brokerages will be drawn into the fray. Perhaps the major legacy of the scandal though will be the startling picture it has provided us of the "horribly rotten, comically stupid" alternate moral universe that traders inhabit.

3. HSBC's money laundering fine
If the LIBOR scandal wasn't enough, HSBC's record breaking $1.9bn settlement with US regulators for money laundering in Mexico really capped a year that demonstrated how readily financial services companies could deliberately flout the rule of law, and bypass their own control systems with impunity. The HSBC settlement followed similar (though smaller) money laundering settlements against foreign banks including ING and Credit Suisse. What was particularly remarkable with HSBC was the fact that despite having strong evidence the authorities elected not to indict the bank out of fears of possible financial collapse.  The message? Four years on from the financial meltdown, some financial institutions are still too big to fail ... but their licence to operate looks increasingly at risk.

4. Bangladesh factory fire
The death of 112 workers in the Tazreen fashions factory fire of November marked probably the saddest moment for corporate responsibility in 2012. It also provided a powerful reminder that the global apparel industry still had not got its house in order regarding working conditions in the product supply chain, despite two decades  of codes of conduct and factory audits. Tazreen was making clothes for global brands such as Wal-Mart and Sears, who remarkably did not even know that their products were being manufactured there. All in all, a devastating wake-up call for the world of supply chain monitoring.

5. Lonmin mine shootings
Described by the BBC as the bleakest moment faced by South Africa since the end of Apartheid, the shooting of 34 striking miners by police at the Lonmin Marikana platinum mine demonstrated the escalating difficulties of doing business in the global mining industry and in an increasingly fractious South Africa in particular. Lonmin tried to remain above the security crisis, which in total claimed some 44 lives, but a company that not so long ago had the highest CEO:average worker pay gap on the FT 100, operating in one of the most unequal countries on the planet was bound to breed resentment.  Unfortunately the more fundamental reform required to significantly ease the tensions at Marikana looks unlikely.

6. Wal-Mart's Mexican corruption scandal
Wal-Mart wasn't the only company put under the corruption microscope in 2012. Canadian engineering firm SNC Lavalin, among others, was another high profile casualty of increased vigilance among national prosecutors. But the Wal-Mart de Mexico story makes it into our top ten a) because it marked such a sudden reversal of fortune for the company after its much vaunted CSR makeover of the past few years; b) because retail, unlike construction, is rarely a site for major bribery.  Many of the facts are still to come out, but a devastating investigation by the New York Times points to Wal-Mart's Mexican business being a "an aggressive and creative corrupter", systematically using bribery to obtain store permits for its rapid expansion and subverting democratic processes and regulatory safeguards in the process. Critically, the company was also found to have deliberately hushed-up the problem to protect its burgeoning reputation, closing down an internal investigation in 2006, and failing to report any of the illicit payments to the authorities. Suddenly all those nice sustainability initiatives don't look quite so pretty.

7. The BBC's Newsnight sex abuse fiasco
With the fallout of the News International phone hacking scandal still very much a part of the UK media landscape, the last thing the sector needed was a scandal at the most trusted media organization of them all, the BBC. But when the 2011 decision to terminate a Newsnight investigation into sex abuse claims against the recently deceased, former BBC presenter Jimmy Saville came to light this year, it because clear that something was wrong at the redoubtable British media organization. It was left to a rival broadcaster to finally break a story that has since become probably the largest serial sex abuse case in UK history. The BBC then spiraled further into disaster when Newsnight broadcast sex abuse claims against an unnamed senior establishment figure that were very quickly discovered to be untrue. The Director General of the BBC resigned amid the panic and confusion whilst a subsequent report into the BBCs handling of the Saville investigation labelled the organization "incapable and chaotic" with a culture of distrust. It's better than "immoral and deceitful", but hardly a ringing endorsement of responsible management.

8. Starbucks' "voluntary" tax payment.
After bubbling away for a few years, 2012 was really the year that tax justice broke into the mainstream consciousness. Campaigners have targeted various companies over the years, but when the spotlight fell on Starbucks, along with Amazon and Google, for their failure to pay tax on millions of dollars of profits in the UK, activists, politicians and consumers called for change. Not that any one suggested that any of the companies had broken the law, merely that such aggressive tax avoidance didn't align with many people's conceptions of fair play. Starbucks' offer to make a "voluntary" payment of $30m to make up for the shortfall suggested that they could read the message in the coffee grinds about where the debate was headed - towards greater expectations placed on companies to be "good citizens". But clearly the onus is also on politicians to beef up the rules ... rather than just criticize companies who are able to take advantage of their shortcomings.

9.  The Super PAC election
The US election was one of the big news stories of the year, and one of the main corporate responsibility issues swirling around the election was about the role of corporate money in politics. This was the first US national election since the 2010 Citizens United legislation which effectively removed any cap on political donations by companies. No surprise then that the election was the most expensive in history with corporate money aggressively channelled to candidates through super PACs (political action committees). Even though this was expected to benefit former hedge fund boss Mitt Romney, Obama came out ahead, perhaps demonstrating that money can't always buy elections. But when even the Harvard Business Review blog starts carping on about getting corporate money out of politics, you know that a tipping point could be fast approaching.

10. BP oil spill aftershocks
Just because it was our no.1 story two years ago, that doesn't mean the BP oil spill isn't still telling us something new about corporate responsibility. This year, we saw the company slapped with a record $4.5bn fine from the US Justice Department after it admitted to criminal responsibility for the explosion that led to 11 deaths on the Deepwater Horizon well. The company could still face a bigger fine following a civil suit for the damages caused by environmental pollution. But maybe the most significant aftershock of the spill was the decision by the US Environmental Protection Agency to suspend BP from bidding for federal contracts over their "lack of business integrity". Although it's still unclear how long the suspension will last, this suggests a potentially significant shift in the government's strategy for dealing with irresponsible companies. Or maybe it just means that BP didn't get its lobbying strategy right!


Photo copyright meteo. Reproduced under Creative Commons Licence

Lessons in politics from Starbucks: sign of the times or storm in a coffee cup?

Drip, latte, cappuccino, espresso, frappuccino; short, tall, grande, venti, trenta. Starbucks, the international coffee chain is great at giving choice in getting our daily dose of java. But what about campaign contributions or no contributions? Doesn't exactly roll off the tongue in the same way, but that is the stark choice that Starbucks CEO Howard Schultz is now offering US politicians in the face of the country's ongoing debt crisis. For the past few weeks Schultz has been seeking to build a coalition of US business leaders ready to join him in withholding campaign contributions from Washington until the main political parties start working together and agree a debt deal to turn around the beleaguered economy.

In the last few days Schultz has stepped up the campaign with full-page ads in the US press, including the New York Times, taking the form of an open letter on Starbucks headed paper to his "fellow citizens" to join him in "restoring hope in the American Dream" by sending "the message to today's elected officials in a civil, respectful voice they hear and understand, that the time to put citizenship ahead of partisanship is now".

It's quite a remarkable campaign. Schultz has the support of more than a hundred business leaders joining his pledge. Among those listed as "key supporters" on the campaign website are the CEOs of AOL, BBDO, NYSE, NASDAQ, Wholefoods Market and Zipcar. It is not such a significant coalition yet to cause the main political parties any real loss of sleep - compared with major contributors, most of these individuals and companies are not heavily involved in funding political parties. But for a business leader like Schultz to come out and so explicitly take a stand that effectively seeks to hold his domestic politicians to ransom until they do his bidding represents a fairly unique twist on the growing involvement of business in politics and the claim by corporations to be "good citizens".

In one sense, Schultz should be applauded for seeking to use his own and his company's economic muscle to try and achieve what he sees as a greater public good. Management guru, Rosabeth Moss Kanter, for instance has come out in favor of his "courage and leadership" in attempting to restore confidence. Even the more cynical corporate critics will find it difficult to see a clear-cut corporate self-interest at stake here. Sure it could help reinforce the famous Starbucks brand but at the same time its also going to annoy a lot of people too, especially those in Washington who are being labelled by Schultz and his CEO friends as having a "pervasive failure of leadership".

On the other hand, though, we might also question what's really going on here when we have a company CEO leveraging his company brand in such a way to make a political rather than an economic point, and at the same time claiming to be a "fellow citizen" with the rest of us (who can hardly afford to take out full page ads in the New York Times to present our own views on the current political logjam). This is not just Schultz the individual citizen speaking here but Schultz the corporate CEO and representative of Starbucks. But then, if (and it is a big "if") we accept corporations as political actors, then at least this example represents a fairly good case of building coalitions, providing an arena for free and fair deliberation, and moving beyond mere corporate self-interest.

To our mind the whole situation presents a really interesting insight into the emerging political role of the corporation and the difficult decisions that have to be made when business leaders start increasing their involvement in public debates. According to a McKinsey survey, "almost half of US executives believe they and their peers should play a leadership role in publicly shaping debate and in efforts to address sociopolitical issues such as education, health care, and foreign policy ... yet only one-seventh of survey respondents consider themselves to be playing that role now". Schultz's efforts to restore economic confidence by taking a step into politics gives us a taste of what might happen when these executives really start doing so. We still have a choice about whether and how those steps should be taken.

Photo by Nick Humphries. Reproduced under Creative Commons Licence.

World's stupidest Gaza boycotts?

As a follow-up to our last post, this interesting blog entry from the folks at Foreign Policy may raise some laughs .. or a few hackles. The comments are interesting too. Thanks to Kejia for alerting us to this one...


The world's stupidest Gaza boycotts

Predictably, Israel's continued assault in Gaza has led to renewed calls to boycott Israeli products. Everyone has a right to express their political views any way they see fit, but it's safe to say that some proposed boycotts are less productive than others.

More than 2,000 restaurants in Malaysia have removed coca-cola because of the United States' support of Israel. The Malaysian Muslim Consumers Association has also pushed for boycotts of Starbucks, Colgate, McDonald's and Maybelline in order "to protest Zionist cruelty."

Coca-Cola is a particularly odd target since it's bottled and sold locally by a Malaysian-owned company, so the activists are really just hurting their own country's economy. (I remember from college that students campaigning for a campus boycott against "killer coke's" Latin American business practices faced the same problem.) It's also ironic given that the company was once criticized as anti-Semitic because of its reluctance to break an Arab League boycott by selling coke in Israel.

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