A sweet defeat?

Monday’s  news from New York puts the topic of corporate responsibility and food back on the agenda. One of Mayor Bloomberg’s flagship projects, the ban to sell soda or sugary drinks in larger than 16oz (0.47 litres) servings was blocked by the Manhattan Supreme Court – just one day before it was supposed to go into effect.

It puts an interesting spin on the debate on corporate responsibility of the food industry, which was a recent topic on our blog. Former business tycoon Bloomberg - in a rather non-business friendly manner – is obviously a strong believer in harsh, imperative, top-down governmental regulation when it comes to responsible business behavior. Whether this is just because he knows business in and out is an interesting question...

Be that as it may, resorting to strict regulation in this area has always been more of a European approach – as the fallout from the horse meat scandal in the EU now also seems to suggest. Even more interesting it is now to see how differently things work out in New York. First of all, the link between the amounts of sugar in Coke, Pepsi or Dr Pepper and the ongoing obesity epidemic in the US is more than obvious. Sugar contents are clearly labeled and therefore – unlike the horse meat scandal – it has little to do with the fact that consumers are misled or otherwise shortchanged.

The unsurprising news here is that the court case was brought up by the beverage industry. For them the judgment provides ‘a sigh of relief’, as one spokesman put it. More surprising though is the fact the ban - a sentence brought down by an otherwise liberal/left leaning judge - was very much opposed by another group of rather unusual suspects: African American and Hispanic community organizations.

In some ways, this is a rather preposterous occurrence. Exactly the demographics which are hardest hit by obesity are the ones opposed to the ban (and in other US states) also against taxation and other measures to rein in on consumption behavior. Their arguments, as a lengthy analysis in The Times this week surfaced, is mostly about economic and ethical issues: they find those measures a direct discrimination of minority consumption patterns, of minority businesses (like small corner shops and bodegas) and a general overreach of government into the nitty gritty of individual decision making.

Interestingly, the soft drinks industry has discovered this ally and heavily sponsors these groups – all under the cloak of ‘community engagement’, ‘partnership’ or ‘diversity stewardship’. Of course the industry denies that their funding of these groups influences their stand on the issue; and in some ways that is credible. But we can also say that the corporate interest to back such groups on the issue of regulating sugary drinks aligns perfectly with the agenda of minority groups – which makes them prime candidates for fighting together on the same issue.

In some ways then the approach taken by PepsiCo, Coca Cola and other soft drinks companies is the epitome of cynicism; or as Kant would put it, just using people as a means to an end. But then we knew that many big corporations, despite their engagement in CSR, Citizenship or Sustainability, are still by their very set-up self-interested predators.

The New York story of this week though also shows the limits of governments in encouraging responsible corporate behavior. As one community leader put it:

“I don’t think we move the needle by legislating what people ultimately eat or drink. [,,,] Our experience has been that you educate folks, empower folks — meet them where they are, basically.”

At the end of the day, it is about changing long entrenched consumption patterns and address blatant ignorance about our food, its ingredients and its impact on our health. All these things, however, have been shaped in no small way by those very corporations for a long time. Just think of their advertising budgets or their efforts to sell their products in schools to children, just to rope them into their products and consumption habits from early age.

In some ways this leads back to Bloomberg himself. He made his billions creating an information platform which has perfected the performance measures and ability of investors to learn about the finanicial performance of companies. As long as we do not change these incentives which drive the entire system, however harsh measures which are just targeting the symptoms are not going to work. In as much one can hardly argue with outlawing to sell sugary drinks by the buckets to vulnerable consumers as a good thing – the defeat of the measures in court shows that a superficial cure of the system of food production is not the solution. In that sense this week’s ruling may also be a blessing in disguise.

Picture by The Seafarer, reproduced under the Creative Commons License.

Fun facts about corporate accounting scandals

Regular readers will know that we have a soft spot for corporate responsibility infographics. The one below, which recently crossed our desk courtesy of Accounting-degree.org, provides a nice overview of some of the big corporate accounting scandals of the last 15 years or so. The title may be misleading - it hardly seeks to capture the biggest scandals of "all time" - but it does give a good summary of those that have happened in recent memory. And the sources of the details they provide are cited - most of which (but not all) are pretty reliable. So if you want a five minute summary of all that's wrong in the world of accounting fraud, and you don't mind a strong US bias, this is a good place to start.

One thing we particularly like are the "fun facts" accompanying each scandal. OK, so most of these are not really much fun at all - is anyone laughing about the introduction of Sarbanes-Oxley after the Worldcom and Enron scandals? - but they do point to some of the absurdities of the system in which the accounting scandals have taken place. Enron being voted most innovative company six times in a row by Fortune magazine, Lehman brothers being honored with "Most Admired Securities Firm" a year before its collapse, AIG execs getting $165m in bonuses just after posting the largest quarterly loss in American corporate history and getting a government bailout? It doesn't say much about how well we scrutinize or reward supposedly "successful" companies, does it?

It's also interesting that the infographic has been created by an organization promoting online accounting degrees (we might add that their other Featured Article is titled "10 Accounting Tricks the 1% Use to Dodge the Taxman", which is also worth a look). Are they saying that an accounting degree will help avoid some of these problems in the future? That what we need are better accounting degrees? That an on-line offering is in any way more or less likely to lead people to engage in shady accounting practices? Clearly there is an important role for accounting education in here somewhere, but we're not too sure about the offerings being recommended by Accounting-degree.org, or even who the organization is or what its methodology is. In the spirit of good accounting, a little more transparency would be a good thing. But don't let that stand in the way of enjoying a nice infographic.

Source: Accounting-Degree.org

Photo by AJC1. Reproduced under Creative Commons Licence

Horsing around with our food

It is now for more than a month that we read about the horse meat scandal in Europe – or the ‘2013 meat adulteration scandal’, as it is referred to on its own Wikipedia page. Today we learned that the scope of the issue is by no means just linked to some obscure Romanian supplier. High street brands such as Nestlé and Birds Eye are now implicated and there is little hope that this will die down any time soon.

Scandals around food, and in particular meat production, are anything but new. The seminal event here is still the BSE scandal nearly two decades ago. But there are some remarkable differences with this latest one.

Initially, it is worth noting that the BSE scandal was around meat that was potentially harmful; BSE infected meat can cause Creutzfeld-Jakob disease which until 2009 has killed 166 in the UK (the then centre of the epidemic). Horsemeat as such is not harmful to health (though some contaminants have been discovered from medication horses were given to enhance performance, as most of the horsemeat seems to come from animals initially not destined to enter the food chain). In some countries horsemeat is considered a perfectly delicious and healthy (poor man’s) food staple.

The key problem is that we eat food that we don’t understand anymore. We buy a ‘Beef Lasagne’, but it is in fact a ‘Horse Lasagne’ (to varying degrees).

It is the breach of trust that upsets people. And it unveils another, much larger issue. The way we eat has been silently, but irreversibly, taken out of our control. Europe is hit with this scandal just in the midst of wider problems. The Euro crisis, and the fiscal problems of many European countries have created a scenario where people suddenly feel their lives are exposed to forces which are beyond their control. The horse meat scandal just adds to that fear, and it also points to one pivotal actor, namely the multinational food company that controls the supply of food.

“The 10 largest companies now control more than 15 per cent of all food sales – three quarters of which are made up of highly processed foods such as frozen pizza, burgers, biscuits and fizzy drinks.”

This quote from The Independent newspaper highlights the core issue. The way we eat is now largely controlled by private corporations. The horse meat scandal just highlights the fact that private, profit oriented actors impact our lives beyond any individual control.

From a CSR perspective one could argue that the food industry has been overlooked for quite some time. Yes there were a number of movies about the topic, most notably ‘Supersize Me’, ‘Fast Food Nation’ and Food Inc.. A big issue has been obesity and how food companies contribute to this epidemic. But by and large, it were oil companies, tobacco companies or banks, which have been targeted recently here.

There are some interesting studies out – conspicuously authored by scholars in medical schools. Rob Moodie of Melbourne University or Kellie Brownell of Yale have put forward a very powerful argument: that food companies pursue exactly the same strategy as tobacco companies did three decades ago.

This stuff is worth noting – without going into too much detail in this blog. Especially Brownell in his analysis does not cast a very favorable light on CSR – as practiced by these companies. There is ample ground to argue that the food industry – even without considering the ongoing horse meat scandal – is one of the most irresponsible industries currently around. The reason is not that they struggle with the usual problems of supply chain issues (such as slavery in cocoa supply) or advertising or – you name it.

Food companies shape the way we live. In particular, it is conspicuous that the current scandal evolves around meat. It is just a plain fact that today we consume too much of it. You do not need to be a vegetarian or vegan to say this. Meat is a precious commodity, providing pivotal nutrients to humans, based on the death of other sentient beings. Traditionally, humans have always been aware of this special status of meat consumption. Just think of the rituals around meat consumption in many of the world religions – be it Judaism with its sacrificial cults or Islam with it's stipulation of ‘Halal’ rules. And even in a secular world some of these traditions have survived until today. I am writing this blog from Istanbul, where my local butcher has a webcam to the farm where the meat is sourced up on a screen in the shop. You cannot buy minced meat (the core issue of the horse meat scandal) in most Turkish butcheries; you have to pick a piece of meat in the counter and than it gets minced in front of your eyes – so no doubt about what you are eating. And: meat is expensive in Turkey. No $2 Lasagne here...

Which points to the general issue. Our food is no longer provided by local butchers, greengrocers, fishmongers or bakeries. We buy it from multinational brands. The way they do their job is one problem. This is what the current scandal is about. The other problem though is why we buy ready made meals, processed food, trans-fat infested snacks in the first place. It is an element of our lifestyle, where only little time is available for us to actually cook our own food.

Food production is the next big CSR issue. We need more research, more critical investigation, more clout behind this issue.

DM

Photo by Gene Hunt, reproduced under the Creative Commons license.

A 2 minute lesson on employee engagement for sustainability ... that will make you smile

Everyone knows that getting employees engaged in sustainability initiatives is tough. This fun little video shows why so many efforts go wrong and how "green jujitsu" offers green champions a better way forward. It's not saying anything new to anyone that has been in the field a while, but it gets the message across really well in less than two minutes ... and its great advice for getting started in employment engagement. As Gareth Kane from Terra Infirma, who put the video together says, "It's deliberately lightweight, but it carries an important message - ditch the eco-cliches and put yourself in your colleagues' shoes."

 


 Here's the original link on Youtube which tells you a little more about the green jujitsu approach - essentially using your employees strengths, habits and interests as an opportunity rather than a threat.  

Unilever and responsible capitalism: a "licence to lead"

Over the past two days, we've had the good fortune to hear up close what Paul Polman, CEO of Unilever, has to say about responsible capitalism and the role of Unilever in making the world a better place. Polman has been in Toronto speaking in the Bata Lecture Series on Responsible Capitalism hosted by the Schulich School of Business. And from what we've heard, Polman is in a different league to most of the other identi-kit CEOs out there. He really gets that business has to do things differently if its to succeed and prosper in the future. And so far, he's been backing that vision up with real progress. That's not to say that Unilever is anywhere close yet to being a truly sustainable company, but few CEOs of global multinationals can match Polman's grasp of the challenges ahead. And more importantly, few can match his visioning of where he wants to get to.

Polman says that what we need to do is change the conversation about social responsibility from one about a "licence to operate" to one about "a licence to lead". The former is about meeting your basic legal and ethical obligations. The latter is about building for the long term based on "growing our businesses in line with the needs and aspirations of the communities we serve". OK, he's hardly the first to talk about long term goals and win-win opportunities. But what's interesting about Polman is that when he talks about the long term, he really seems to mean it. Talking about a resource constrained planet, global hunger, infant mortality, and the like, Polman sees plenty of opportunities in bringing people out of poverty and giving them the products they need to live better lives. But he's not just thinking about the 7 billion inhabitants of the planet who are already struggling to get by, but the next 2 billion that will be born in the decades ahead. As many people know, under Polman's leadership Unilever has embarked on its hugely ambitious Sustainable Living Plan with, among other things, a goal to source 100% of its agricultural products from sustainable sources, and a plan to double their revenue whilst reducing their absolute environmental footprint by 2020.

As Polman made clear in his talks, much of the company's impact comes not just in Unilever's own business but in their value chain and among their consumers. Getting people to wash at lower temperatures and to shower for 2 minutes less can radically reduce the carbon footprint of their products in ways that far outweigh operational efficiencies. And who better to change consumers' behaviour than the marketing experts at Unilever? If they can make us buy a bunch of stuff that we don't really need (and let's be honest, a lot of what they still do is exactly about that), then they can certainly get us to burn less energy when we're doing it.

What was inspiring about Polman's vision though is not so much the big goals they've set, but the framework they're trying to achieve it within - radical transparency, collaborative action, and brands that all have a social purpose. To you or me, it may look like a bar of soap, but to Polman, "we're not in the business of making soap, we're in the business of saving lives" as he said about their Lifebuoy product which aims to improve hygiene in the developing world.

Of course, getting a licence to lead is not just about getting a renewed licence from customers, but also from shareholders. A long term vision doesn't often sit well with short term focused investors  Polman moved quickly on this when he was first appointed CEO of Unilever in 2009 - within weeks he had stopped offering quarterly guidance ("I figured no one would fire me in my first month" he quipped). And trading investors they didn't want for those they did want - i.e. those with a little more patient capital - has been a critical element in Unilever's transformation.

So far it is clearly bearing fruit - progress towards the many goals of the Sustainable Living Plan has been good and the performance of the company is better than ever. Polman appears to be well on the path to finding the holy grail of matching economic growth with social prosperity. But as he acknowledges, the path will not be easy one, and Unilever won't be able to do it alone. As he said, even if Unilever meets its ambitious goals, it won't have succeeded unless other companies have joined them. "We're just a pimple," said the leader of one of the world's largest packaged goods companies.