We have worked in teams of various configurations, employing a range of traditional, creative and developed-on-the-fly processes and procedures.

Have we learned  much? You can’t imagine. Or maybe you can –  maybe you too have experienced an amazing run of intense-lively-fun-boring but necessary-scary-noisy-excited-exciting- much successful- some not so successful but never, never uninteresting work.

Well that what’s been going on around ES Global Consulting these days, and here is what I have learned (now applying it consistently is the next task!)

On Listening
Listening can be learned but it takes time.

The Fruits of Listening
You probably haven’t listened hard enough if you can’t sum it up in a  short sentence.

On Reflection
Purposeful reflection, alone or with colleagues, is a priceless method of listening.

Time for Reflection
There is never not time for reflection. What you may not have is patience. Now that’s something to learn.

On Time
Time is something most of us believe we don’t have enough of but upon reflection we certainly do.  The question is how you use it.

Action Based On Selfless Desire
Be clear about what you want knowing that it’s seldom about you. And whatever you do make it yours but don’t pretend to own it.

Conscious Action
Take action only upon reflection, knowing that doing the minimum is a tactic not a strategy, and that at some point dramatic change will be required.

Courage
Be honest and brave.  The future depends on it.  Stay where you are only for good reasons.  Walk away with purpose when you must.

 CSR Leadership
Listen with patience, reflect well and let selfless desire direct courageous action.

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I suggested that there would have to be four key areas of action:

Let’s see how they did so far.

Embrace the Problem!

In my blog I noted that Wal-Mart needs to own the problem. Did they? Kinda, but not really. This is the meat from their first press release about the matter:

“In a large global enterprise such as Wal-Mart, sometimes issues arise despite our best efforts and intentions. When they do, we take them seriously and act as quickly as possible to understand what happened. We take action and work to implement changes so the issue doesn’t happen again. That’s what we’re doing today.” A second press release seemed to put more emphasis on:
how can we (by “we” I assume the current management) be blamed for something that happened six years ago?

So, seriously and quickly? Let’s see… current CEO, Mike Duke, was head of Wal-Mart International and was informed of the situation at the time. The current Vice Chair, Eduardo Castro Wright, was then head of Wal-Mart Mexico. Current board member Lee Scott, then CEO was according to the Times, also aware of the bribery allegations.

Embracing the Problem: 3 of 10.

Be Sincere

Sincerity: “free of deceit, hypocrisy, or falseness; earnest: a sincere apology”

Now, I am no expert on emotions (Canadian hockey playing, economist, cowboy, that I am), but it doesn’t seem to me that Wal-Mart’s spokesperson David Tovar, Vice President for Corporate Communications, read a very earnest or sincere apology. (See Wal-Mart’s statement at http://www.walmartstores.com/). If reading a statement where even inflections are cued is sincere, top marks to Wal-Mart; rather, the statement seemed to be more the kind that makes for happy lawyers , but leaves everyone else somewhat less than satisfied.

A sincere statement would have offered an apology to Mexicans (conditioned of course by the premise “if laws had been broken”). True sincerity may have extended more (some) concern for those possibly affected by Wal-Mart’s alleged behavior. What about the hundreds of Mexican neighborhoods that could have been unfairly disrupted by zoning irregularities? How many communities in the USA objected to Wal-Mart’s supposed lack of sensitivity to local retailers? We know Mexico is home to millions of “mom and pop” stores. Let’s not even talk about environmental laws or unfair competitive advantage to other companies who play by the rules (France’s Carrefour apparently pulled out of Mexico because they’d had it with bribes amongst other things).

Following the rules is not just good and fair for all businesses; it’s what civilized people do. But don’t trust me when you can listen to Mike Duke talk about such key themes as global responsibility, doing what’s right, being responsible citizens as a corporation, foundations of integrity, improving the world we live in and more on the Wal-Mart website http://www.walmartstores.com/

I don’t believe Tovar or Wal-Mart was being deceitful in terms of the subject matter addressed in their statements with regards to the Mexican situation, but if deceit is defined as “the act or practice of concealment or distortion of the truth for the purpose of misleading; duplicity; fraud; cheating” there is room for discussion about the things they chose not to discuss: Why the original investigation was shut down, why did it take six years and the NY Times investigation for them to take this issue seriously, why did lead council International quit in 2006, etc..

A second test for sincerity: why did Tovar, and not Duke, make the statement – after all, it was Duke who has overseen and promoted the company’s sustainability-oriented market brand image. Again, check out the link above.

Sincerity 3 of 10

Concrete, Serious and Comprehensive

As I noted in my last blog, stakeholders will want a clear and simply laid out plan to address the problem. What was said: “We are taking a deep look at our policies and procedures in every country in which we operate.”

A look at policies and procedures world-wide is well worth the effort. As a stakeholder of Wal-Mart, however, I would prefer a deep audit of those policies and, more importantly, a deeper look into the behavior of senior executives who manage them. As the president of the United Food and Commercial Workers International Union Joe Hansen put it in a New York Times article last earlier this week “The corruption scandal and reported cover-up exposed an unacceptable failure of leadership within Wal-Mart”. Investigate the people not the policies.

Would it have taken six years to investigate had the scandal taken place in the US? Or was the matter brushed under the rug because bribery is expected to be part of doing business in Mexico?

As most of the senior executives at the time of initial investigation are now in even more senior positions in Wal-Mart and elsewhere, we have to assume that they believed that the issue was either a) not important enough to act upon seriously or b) something that Wal-Mart thought they could hide. The New York Times reports “about the time Mr. Scott (then CEO) began the offensive to improve Wal-Mart’s image in the United States, he also rebuked the company’s internal bribery investigation in Mexico for being overly aggressive. The investigation was soon dropped.” Is this reflective of the seriousness Wal-Mart ascribes to its investigations?

Turns out they couldn’t hide it (proving once again the diary farmer’s maxim “only the biggest hunk of guck always rises higher than the cream”). More important than lack of stealth is the
continuity of senior executives and the corporate culture that followed its wake.

What shareholder should accept such (allegedly) poor management practice? While many believe the independent investigation by KPMG and Jones Day, announced by the company will fix Wal-Mart’s woes, many others are asking what the next surprises will be.

Note to self: Don’t hold your breath for independent, outside help to fix things either. Nothing against KPMG but it just seems that consulting firms and legal advisors whose business is 99% refining the best business practice of the last century, may not yet have fully come to terms the sustainable century of which Wal-Mart looked set to be a leader of .

And there can be no doubt that the (alleged!) corruption hubris in which Wal-Mart finds itself neck deep in is at heart an issue of CSR/sustainability: bribery, disregard for community and circumventing environmental controls is bad for everyone. A more sophisticated version of a century old approach to management won’t change that. We need paradigmatic change, which, quite ironically, large companies like Wal-Mart are best placed to conceive and lead.

In the short term, however, I suspect, all we can expect is better defense (i.e., internal controls and perhaps, for the cynics among us, better ways to hide bad things that happen) and/or sharper ways of hiding the bits about sustainability companies don’t really like to address.

Until Wal-Mart deals with the local and business culture impacts, their response is hardly comprehensive. More like business as usual.

Concrete 3 of 10
Serious 2 of 10
Comprehensive 1of10

Do Something Tangible and do it Right NOW

Perhaps I should have been more concrete. Wal-Mart needed to do something tangible and satisfying and right now.

A fat consulting contract for KPMG to examine policies might be enough for conventional investors but it’s hardly the right stuff for the sustainability crowd, not to mention the 75% of Americans with an unfavorable opinion of Wal-Mart.

Everyone I spoke to believes the incident calls for nothing short of the appropriate head rolling out the door (I recall the company named its 2010 annual sustainability report Global Responsibility Report, so the question on many peoples lips is whose going to be held accountable (aka the dark side of responsibility when times are bad).

I will hand it to Castro-Wright, he sure knows when to retire (hands up who believes he actually decided to retire late last year and if he did, then cynics might ask: how long did Wal-Mart know about the rising guck?).

Last week Castro-Wright also announced his resignation from the board of Met Life (bet they were happy). His reason: “Over the past weekend, I notified you of recent events that will require my immediate and personal attention,” he said in his letter of resignation, adding later, “I now must focus my energy in spending personal time with my family and in protecting my good name and business reputation.” It should be noted that Mr. Castro-Wright was also a member of Governance & Corporate Responsibility Committee at Met.

An internal investigation is hardly a start. Doing something tangible now: 2 of 10

Anything Less than the CEO will not Do
But firing Castro-Wright would have been like pouring water on a wound. It cleans it off but doesn’t do much more than expose the real problem. In cases like this, most people want the CEO to go. Others want current Chair of the Board, S. Robson Walton, eldest of founder Sam Walton’s children (also allegedly informed of the matter in 2005) to go as well (note: Robson has been chairman of Wal-Mart since 1992).

My guess is that Duke has a strong enough hold on things at Wal-Mart to think he can weather the storm. Indeed, conventional business press’ sentiment seems to be that over time the company will periodically communicate measures to improve its anti-corruption practice and that’s enough. Initial response was that it has done a “good job of explaining measure in place now” to investigate and resolve the bribery allegations, both in Mexico and throughout its operations. Continued low prices its seems to the conventional press sufficient to get through this mess (see for example, http://www.usatoday.com/)

We will have to see, but the company’s expansion plans in the US (and obviously in Mexico, and likely around the world) will/are come(ing) under much greater scrutiny. Already this week politicians, civil society organizations, and labour unions began wondering out loud about Wal-Mart’s pattern of donations to inner city charities and political campaigns where Wal-Mart hopes to expand (expect an angry Wal-Mart Stakeholder App soon).

Much of the CSR insurance the company’s considerable and still very important/leading sustainability work won has been lost with the failure to acknowledge that their leadership was, at least, unable to control or present a credible defense against the Times allegations and was, at worst, obviously duplicitous about the central role of integrity in sustainability.

From where I sit, not firing Duke or at least ousting Robson Walton or Lee Scott from the board, could prove to be a very expensive non-decision. Covering up anything in business is bad, but it’s particularly so if it’s directly related to the thing that is supposed to make you shine.

Anything Less than the CEO: Minus 5 of 10

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With the publication in the New York Times article about widespread bribery at Wal-Mart Mexico including an alleged corporate cover up, best practice CSR was vindicated. Specifically — follow your ethical code of conduct and nothing bad will happen: don’t and it will.

At the same moment, however, we lost one of the best sustainability business cases models in WalMart which turned its labor union/community busting reputation into a sustainability leader position in less than a decade.

Billions Lost

As of positing, we estimate WalMart has lost between $3 and $5 billion USD in CSR Brand Value (the monetary contribution of CSR to the company’s brand value). Gaining this value back will be difficult at best (if at all possible) and big CSR lessons will be learned in the days and months ahead (look for coming blogs here at CSR Counts).

In the near term, however, the company’s immediate response to the crisis is critical.  Here some things we should be watching for.

Embrace the Problem

WalMart needs to own the problem: “We screwed up, it’s our responsibility and we will fix it.”

The Times article is likely only the tip of a very large iceberg to be investigated and I am willing to bet my mortgage many more and much messier facts will emerge in short order.

Unqualified fault is the first and only thing company representatives should recognize and admit, for one of fastest ways to destroy CSR Value is to say that you’re innocent one day and plead guilty the next (remember Bridgestone distancing from its faulty tire manufacturing only to later admit guilt leading to righteous and massive consumer outrage).

Be Sincere, Concrete, Serious and Comprehensive

Smug, arrogant, defiant or defensive are things that only cemented public opinion against the likes of Enron and BP executives after their respective CSR crisis.  Sincerity on the other hand, helps a company connect to what the stakeholders want more than anything else – a way to believe executives understand and are humble before the problem.  This is why GM leaders shouldn’t have showed up to a White House bailout meeting in a private corporate jet.

But sincerity only sets the tone. Stakeholders will also want a clear and simply laid out plan to address the problem — in this case, bribery and an incredibly self-defeating internal audit/investigation protocol.  Anything vague will not do as it only adds salt to the natural cynicism and understandable anger of stakeholders.

WalMart will need to seriously address all significant stakeholder concerns (and there will be many)!  Are there Mexican communities negatively affected by skirting zoning laws? Are there environmental concerns that need to be addressed? Was internal audit protocol jimmy-rigged to avoid the company’s own ethics code which states “Never cover up or ignore an ethics problem”?

These issues will surface and the company will have to seriously engage them one by one or risk losing further credibility.  Honestly is key and WalMart should get used to saying “we don’t know but we will find out” and then deliver on that promise but quickly.

Do Something Tangible and do it Right NOW

Stakeholders always want an immediate and cogent response to a crisis. This is in the company’s interest as well, for the time between a crisis hits and first response, and first response and first concrete action, serves only to fan the flames of uncertainty and cynicism.

A company can’t just turn out a good press release, it has to be seen doing something meaningful: for while doing nothing is bad, doing something half-hearted is worse.  BP’s months-long bumbling through its Gulf of Mexico spill is a case in point (describe BP’s CSR Brand in your head… point made!).

Valid or not, an executive root canal is almost unavoidable at WalMart (i.e., big wigs need to fall).

Anything Less than the CEO will Not Do

Mike Duke is WalMart’s CEO and he needs to take charge and responsibility.  According to the NYT article all the top brass at WalMart were “in the know” about bribery in Mexico. True or not doesn’t matter,  the ball is in WalMart’s court and bringing the second team to respond will only solidify the image WalMart dosen’t really care.

Employees, as well as shareholders and other important stakeholders (including government and law officials), will only be reassured by the presence of the CEO. Moreover, it’s Duke that has been singing the sustainability song and now he must be held accountable to his own ballad (perhaps goodbye, fair-well, Auf wiedersehenadieu, adieu might be the most appropriate chorus).

The Start of Something Better?

Throughout the day, I have noticed several media and corporate leaders in Mexico supporting WalMart in various ways. It is encouraging WalMart’s leadership is recognized because, allegations aside, the company’s initiatives have done much to promote sustainability in the country.

This said, today marks the beginning of a very long road for Walmart to recapture its full CSR Brand Value – about which I hope to write about this in the coming days.

In the meantime, my hope is that dusty codes of ethics are flying off the shelf by newly inspired (scared?) corporate executives and that today also marks the beginning of a new level of awareness about the perils and cost of poor CSR performance.

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In the article, Kenzie corrects Bolling’s estimate of 18.5 cents a kilometer for the Volt to a more precise number of 2.5 cents.  Still, Kenize – no fan of electric cars – notes that even with this differential, one would have to drive the $45,000 Volt over 416,000 km to justify its comparatively higher purchase price (compared to cars of its class).  He writes of Bolling: “if we’re going expose electrics for the non-starters they are, we have to do it with facts.  Accurate facts.”

Kenize has a point, but his facts are far from accurate. But like many (most?? analysts, and not just those on Fox News) he confounds the arithmetic cost of a product with its full value.

Voltinomics and Value?

As I have written in other places, value is in the eye of the beholder. What gives Rolex the advantage over Cartier over Patek Philippe? All high quality watches right? The only value differentiation is the name upon which consumers ascribe an arbitrary value for which they are willing to pay.

So it is for cars, clothes, food – every product has some intangible brand value.  Even anonymous supply chains companies provide intangible value that corporate buyers are quite willing to pay for:  good relationships, reputation, service, etc.

Brand value cannot be captured by an economic input/output analysis (e.g., the individual parts of a Rolex cost $95, labor and other costs total $1,200, ergo I should pay $1,295 plus a margin for profit.  If it worked like that I would have at least two Rolexes!).

So, while Kenzie correctly spanks Bolling for bad arithmetic, his Voltonomics overlooks the fact people are willing to pay for the car’s inherent environmental value, just as many pay for the “status” value inherent in a Rolex . 

Uncertainty Not: Risks? You Bet

It makes me sputter to hear econopundits whinging about the cost of sustainability.  If we the market are willing to pay for the sustainability value in something it’s not a cost, it’s a value. And anyhow those same econopundits that say the market will value and pay for whatever it will value and pay for.  These more conservative forces must be scared as more and more surveys show, consumers are increasingly willing to pay for the sustainability value inherent in products and services (see for example, Oliver Balch’s fine article on Ethical Branding, Briefing Part 3: Consumers – Ethics goes Bananas in Ethical Corporation, March 31, 2010).

And if you don’t think companies are responding, think again.  GM is, in fact, thinking about sustainability markets with the Volt as it understands the risk of not responding to the inevitably more sustainable future of the personal transportation market.

Risk, in this sense, is the chance of some undesirable effect occurring within a set of uncertain probable outcomes.   Actuaries, good business managers, and sage statistics professors know which variables to consider, which in the case of sustainability must include inherent sustainability value  or what I call “CSR Brand Value^©

Econopundits continue, by contrast, to operate from a position of uncertainty believing that from the set possible economic outcome, a sustainability dominated economics is a very low probability. Thus, things like electric cars and the like are ruled out on the basis of rather naïve, straight up pocket-book input/output analysis (just one of many ways to “dis” emerging stainable economics, so disruptive to entrenched management and economic practices and beliefs).

GM decided the opposite and invested significantly in the Volt. Its calculations might have looked like this: there is a 90% chance that 30% of all people with income over $100,000 looking for a new car this year will consider a Volt; and a 90% chance that 0.5% of them will actually buy one, despite the sticker price because of a “sustainability market driver” (all numbers are fictitious to make the point).  More simply, some consumers place a high economic value on the environmental features of the Volt, and are willing to pay for them.

If an analyst remains baffled as to why a consumer would buy an “overpriced” electric car, they should be equally amazed why anyone would buy a SUV with gas at $4 a gallon.

An Enlightening Volt?

GM had to come out with the Volt to preserve its position in the increasingly sustainability minded personal transportation market.  Kenzie’s proto-economics simply omits to consider Volt’s greater value, which, like a Rolex, goes far beyond a simple gas in/kilometers out analysis.

Volt’s true value to GM is risk reduction and know-how for future sustainability market developments that are by no means uncertain. In this sense, GM is already making great returns on Volt; and as markets drive sustainability further into the hearts and minds of consumers it won’t be long before its making a profit on the car as well.

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I suspect one rarely knows what they might get when they start a first blog. Will it attract readers? Will it be compelling? Interesting? Catchy?

I know I didn’t really know, but I did have some ideas as to what might be more popular than not. Turns out after 8 months, I mostly didn’t know!

As some may have noticed, I have not posted in some time due to a rather large project commitment. To my surprise, daily readership has not suffered at all from my lack of attention (hmmm… maybe I should stay away!) More surprising however was to learn which postings attracted the most attention during my absence…….

Before my blog post popularity analysis, a word of context. The goal of CSR Counts is to serve a perceived need among business people wanting strategies and the means (i.e., investment funds) to advance CSR to create more profitable and valuable businesses (thus supporting my real goal of putting all unsustainable business out of business!).

To meet this perceived “market need”, my strategy is to write about measuring the financial contribution of CSR to business success. This is something I have done, in part, but I have also posted on a variety of other CSR themes and issues that struck me of interest – CSR Counts is a bit more of a buffet of posts as a result, than it is a hard core measurement blog.

A second word on context: according to CSR Counts data some 25,000 blog entries have been opened since July 2011, a total Ross Slater of Highspot (highspotinc.com – a great publishing support consultancy out of Toronto, Canada) says is not a bad total for a niche blog – but more importantly a number that provides a good sample to assess!

Back to the topic at hand – so which types of posts were more popular than others?

The most popular to date is Three Cheers for Trucking Stakeholders (1235 reads), an article that is more a report than anything else. Now I know stakeholders coming to together for mutual benefit is a great CSR strategy but still I am surprised it made it to Number One! While the post is informative it really doesn’t say much new about CSR management and less about how to put successful stakeholder coalition together. Maybe it is popular because it implies hope for other industries, or maybe just because I mention of Cadillac Ranch in the post (viva Bruce!).

Anyhow, I was under the impression when I started CSR Counts that more confrontational or opinionated blogs would sell better.

Ergo, I imagined that Benetton: the Bad Boy Singing Peace on Earth, which provides tongue and cheek admiration for the Benneton’s controversial Obama kissing Chinese President Hu Jintao adverts, would be a big hit (706 reads). It was to a degree, but not near as good as Truckers! Same for Conflict Oil (507 reads) a topic I find both controversial and with great potential impact (if we can have conflict diamonds or forced labor cotton, why not oil?).

This said, one of the poorest performing entries is Great Faith in Senior Managers (222 reads!)….. too controversial??? Or what about One Swift Stroke where I suggest the signing of simple legislation to force all public companies to report and be audited under the GRI format for sustainability impact (212 reads) – how can that not be controversial in a pro-business blog?

CSR executive strategy postings have done relatively well but not nearly as well as other posts related to marketing, particularly The Not So Strange Case of Dr Jekyll and Mr Hyde: CSR Market Segments and Growing Corporate Sustainability Consciousness (1,158 views) which grew quite rapidly even compared to Truckers (do marketing folk predominate among CSR Counts readers? I hope so because I love brand value issues – see below for my infomercial).

To my great and head scratching dismay however CSR measurement posts have not done comparatively well. Measuring RIO (563 reads), Capital Advantage CSR: A Measure Worth Paying Attention To (526), Measuring the ROI on CSR – Oh No, not the Holy Grail Again (567), Three Questions for Designing Return/Value Maximizing CSR Strategy (496) and To Measure or not to Measure: The Internal Dialogue of an Equivocating Manager (803). I thought these would fly off the self but alas no — not the first or last time an author has be misled by their own misconceptions)!

I can only speculate as to what all these surprises mean. My first sense, and assuming I have a good cross-section of CSR practitioners as readers, is that like the field itself, much work is left to be done to develop and popularize CSR measurement tools.

Prerecorded Marketing Spiel follows: Like many areas of management, the need to measure to better manage is key to improved performance and enhanced returns….

Enough of that!

Still I have to say — for many reasons, some making sense others not really — managers hesitate to measure CSR financial contributions (see To Measure or not to Measure: The Internal Dialogue of an Equivocating Manager). But I really can’t figure measurement reluctance out. For example, my consultancy offers CSR Brand Value a tool which calculates the financial contribution to brand of CSR – normally between 3% and 15% of a brand’s value or in many cases multi-hundred-millions of dollars in value (this means Coke has about $600 M in CSR Brand Value). Who wouldn’t want to find this out and manage it for more returns? If more companies knew the value of CSR to their business, more investments would be made and more unsustainable companies would be put out of business.

Maybe managers are afraid that their CSR Brand Value is too small. Or maybe its too large and they might a.  have to change how they see the world and or b.  have to go back to get a “sustainability” business school degree to stay relevant…. (btw MIT Sloan has a great diploma in sustainability management etc.)

Many of my marketing colleagues are reticent to measure anything simply because – and they never say this out loud except in crowded bars at marketing conventions late at night – it makes for too much accountability. (Really I am kidding and marketing, particularly brand management measurement is big and important work)

Or it could be that CSR has settled too much into charity and/or marketing strategies and financial contribution measurement goes against conventional wisdom of what is necessary or possible? This doesn’t mean we have to accept charity as a realistic means for achieving sustainable economies, for while giving to the local orchestra is nice, it hardly compensates or resolves all the tough product/service sustainability lifecycle issues we face.

Of course all this whinging may simply be the product of the own sour grapes of my own unfulfilled blogging expectations! I will however stick with my conviction that to measure is to understand and to understand is to better manage, and good management always leads to better profits and value.

As to CSR Counts, well, let’s see what the rest of the year brings as I refocus my energies on serving up new ideas and thoughts for you all.

I look forward to hearing from you!

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There are many “laws” in business and just like those in physics you can pretty much rely on them to be true, and one can observe them or not at their own peril.

One of the most well-known is Murphy’s Law: If it can go wrong, it will go wrong.”

Another is the Peter Principle which states “in a hierarchy every employee tends to rise to his or her level of incompetence”

CSR is no exception, and after twenty years of working in this field, I have observed the following laws:

First Law of CSR – Profitability and CSR are Positively Correlated
Many of us have known for a long time that profitability and CSR are positively correlated.

In the early 1990s, social investment rating services often found companies with the best CSR performance literally had no idea that they were even practicing CSR! These firms were simply well run and a part of that meant treating labor well, avoiding environmental fines, having sound supply chains etc.

Today of course, much more is known about good CSR performance, and the proof can be found in long term performance measures including the outperformance of sustainability stock market indices. These indices bundle together the highest performing CSR firms on a stock exchange to form a stock index. Found in many countries including South Africa, Brazil, the US, England and recently Mexico, they have over the years consistently met or beat relevant comparator indices.

Second Law of CSR – Know Your Stakeholders
A company can’t even begin to maximize returns on CSR if they do not understand the needs and priorities of their stakeholders – internal and external.

Opportunities abound and dialoguing with stakeholders (not just clients) can generate numerous and substantial ideas for CSR improvements throughout a company and its product portfolio.

Likewise CSR related threats and risks are myriad, and those companies that engage stakeholders in a meaningful dialogue will either avoid potential problems altogether and/or will develop a certain amount of “social insurance” in the event something does go wrong. And in the age of the internet, you can bet that if something does go wrong, someone will be filming it and putting it on line.  Remember United Airlines about how friendly the internet can be. http://www.youtube.com/watch?v=5YGc4zOqozo.

Clear, authentic communications and feedback based on a solid understanding of stakeholder interests and needs is imperative if a company is to uncover millions of hidden value or avoid millions in risk.  A sustainability report, preferably in Global Reporting Initiative format, involving substantial stakeholder input is a vital part of any CSR communications.

Third Law of CSR – Crisis Leads to Regulation
If you do not follow Law Two, at some point there will be a CSR crisis resulting in legislation that will always be less favorable that proactive voluntary CSR. Do you want to be “Enroned” or BPed” or do you want to pursue the business advantages afforded by CSR?  Just ask financial sector leaders how much they like the proposed financial legislation winding its way through the US government.

Spending millions on litigation or lobbying may seem proactive and less expensive in the short run, but if companies took the time to measure the full value of CSR they may think of investing with different priorities (and imagine all the good and profitable activities using lobby funding for CSR initiatives; and imagine all the silly and bad things it would avoid).

Companies that focus energy and resources on building CSR value will always see that value grow over time.  The extractive industry, for example, has seen their voluntary code of conduct help companies avoid millions, even billions of stakeholder risk related costs while improving their positive contribution to the communities they are working in and of course to the environment. A new code and guide for doing business by the Global Compact in conflict countries, for example, will support the advance of human rights and better development of oil and mineral rich countries like Sudan and the Democratic Republic of Congo. Following guidelines voluntarily supports better strategy and can provide important license to operate insurance.  Even better, like the US trucking industry, get stakeholders to write great regulations themselves.

It is the Spirit of the Law and How You Measure it that Counts
I have spoken with executives and top business school professors the world round and, believe it or not, many still do not believe CSR is relevant past the doors of a company’s donation’s program.  Lack of vision invariably grows from the fact few companies have yet to provide shareholders compelling evidence that CSR can increase value and earnings and that it should be more seriously integrated into business strategy.

Poor strategic vision reminds me of another business law:  “if you can’t measure it, it doesn’t exist.” Now I have spent my entire career measuring things that were once thought un-measurable – business impact on poor people and communities, stakeholder risk and opportunity quotients, CSR contribution to brand value — and I know that it is possible to measure pretty much anything you want and, more importantly, I have learned “if you don’t measure it, you can’t manage it.”  CSR performance expectations are real and the pressure for good performance increases daily, so both measuring and managing appears not to be an option, but a necessity.

Unfortunately very few companies choose to measure to manage CSR value and returns in a systemic way and as a result fewer still have developed a strategic sustainability culture.

Observing the laws of CSR is simply not enough. Following the spirit of the laws by creating a sustainability culture is what truly generates powerful CSR gains and allows firms like Nike to replace expensive and harmful gas with actual air in their air cushions shoes; allows Starbucks to support coffee farmers and communities the world round; and Pfizer to make a business case for helping poor African get the medicines they need.

Go Straight to Jail – Or Not
Any company executive can take these laws as seriously as they like but they treat them as unimportant at their own risk.  Taking CSR seriously, as seriously as the physics the three laws suggest, will not only keep a company safe in the Sustainability Century it will maximize profitability and value enhancement too.

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This is particularly true in the area of quantifying CSR’s impact on profits and corporate value. It is as the old business maxim suggests: if you don’t measure it, it doesn’t exist. More practically—and because the benefits of CSR are well known if typically unmeasured—if you don’t measure it you can’t manage it and if you can’t manage it, you can’t maximize returns and impacts.

Quantification is vital, as CSR managers are almost uniformly challenged by CSR skeptics or the pro-free market Sharks of CSR disbelief. But even if an executive rejects CSR on ideological grounds, it is still unacceptable in a modern company. Questioning it for lack of quantifiable proof, however, is entirely rational. Measurement and all it implies – responsibility, accountability, room for improvement, etc. – is critical and the Sharks are right about that at least. Without it, how can the CEO’s and CFO’s guard profits and value and, hence, justify to shareholders and stakeholders any investment of time, energy and capital needs in CSR?

Very few CSR managers make the CSR business case in a way that CEOs or CFOs need for comparative investment purposes, preferring to go “intangible”; preferring to argue, as many once did, against brand value: that it is too hard to measure and therefore don’t. CSR contributions are often readily recognized, but rarely is CSR adequately explained in terms of both profitability (i.e., contributions to annual performance) and long term corporate value (i.e., balance sheet contributions).

As it was once with measuring brand value, it is now with CSR contributions. Skepticism is understandable as CSR contributions involve quantification of some pretty tough and fuzzy social and environmental concepts/impacts. There are many competing ways to measure CSR and it is far from the science that financial accounting has risen to, but to believe that it is immeasurable is simply a wrong and a seriously outdated perception.

Without a solid business case, why would any CEO be expected to approve a CSR investment, except possibly as small percentage of profits? So when times get tough and costs are getting cut, non performance defended CSR is often first on the cutting block.

If such a calculation cannot be made for all CSR activities within a company, it may be possible to estimate ROI for a representative number of CSR activities. Eco-efficiencies in the areas of energy consumption, water use, and carbon emissions are typically well quantified, particularly if a company has social and environmental reporting tools such as the Global Reporting Initiative (GRI). Other components that are relatively easy to quantify are local economic impacts such as employment generation, use of local suppliers, and in some cases, local economic multiplier effects. Smart companies use CSR management software making CSR return calculations less difficult to undertake.

The CSR manager may also want to address some seemingly less tangible but nonetheless important issues central to CSR Brand Value, one of which is absolutely vital: trust. Trust has emerged over the last 10 years as a critical company asset. Clients need to trust that a company will stand by its products and services. Employees need to trust their managers; suppliers need to trust buyers will stand by purchase agreements; buyers need to know suppliers will be solvent long enough to meet their needs; clients want to be sure companies will stand by quality and service claims; external stakeholders insist that corporations live up to their public pronouncements on social and environmental impacts.

If trust is so important to business, why do so few companies manage it well? At a time when emotions are high and change is rapid, both internal and external stakeholders are constantly recalibrating how they expect a company to behave, often without reference to a company’s articulated goals and activities. Trust is a core component to my company’s CSR Brand Value methodology and is highly sensitive to negative impacts, perceived or real. Not meeting expectations, realistic or not, can severely damage the trust-glue that holds stakeholder relationships together. This can do long-term harm to a company’s overall brand value. This is true not just for CSR strategies and activities but for any set of relationships that builds and thrives on trust.

CSR Brand Value Maintenance and Trust Management Keys

Understanding how the “CSR Brand Value” contributes to a company’s bottom line and long-term value are only the first steps to maximizing returns and impacts. CSR managers must translate return information into a cogent cost-benefit analysis for maintaining CSR resources and/or making new strategic CSR investments.

CSR Brand Value scenario planning helps identify important market sentiments and stakeholder expectations, as it will for any business investment decision. Scenario planning should focus on risks and opportunities as the operating, market and stakeholder context unfolds. Assessing stakeholder risk relative to various company performance scenarios is particularly important, as is defining “action” trigger points that help cover risk and or take advantage of opportunity.

There are few benchmark “comparatives” available on CSR risk and opportunity related to downturns, but CSR managers can access a broad range of case studies that, while anecdotal in nature, can help to establish the relative financial risks or gains a company may be facing. Social investment analysts have been tracking the relative costs of any number of CSR Brand Value variables for over 30 years. Assessing this information and related social investment indexes, may prove helpful for benchmarking and risk/opportunity assessments.

More with Less

Like all departments or activities within a firm, CRS will likely have to do more with less during uncertain economic times. Creativity is required if the opportunities offered by a volatile markets are to be realized. These are not times for conventional ideas, but for new ways of thinking that break free from experience built on ”how it was”, as those times simply do not exist any more and are very unlikely to return.

What does creative thinking mean for CSR? Examples, from simple to complex, abound. Service companies with few means of reducing carbon impacts, for instance, can invest in one of any number of alternative energy investment funds instead of simply donating carbon offsets to a third party or planting trees. This creates a new asset for the company, encourages financial capital formation for alternative energy, sustainably offsets carbons and increases the planet’s environmental capital base. Which of the two strategies is a better public relations story?

Few CSR managers have the freedom to think creatively, often because they fail to make a solid business case for investments when economies are thriving and because they can get away with being strategically and operationally sloppy. For any CSR business activity to make sense today, it must not only have a solid business case, but it must also be seamlessly integrated into a company’s broader business objectives and strategy. If the CSR strategy of simply “doing good” was acceptable in times of plenty, it will certainly be fed to the Sharks in the downturn. And rightly so!

Managing CSR Brand Value in times of Uncertainty

The experience of brand valuation in volatile times is likely the most appropriate analog for CSR. Through the 1980s and 1990s and even today, brand management budgets were/are often the first and most radically reduced during times of recession. Unable or unwilling to assess brand value contribution to overall corporate value, financial decision-makers found it easy to target brand budgets.

This is unfortunate because brand value is seen as a leading indicator of corporate value and brand perception often influences an investor’s decision-making. Not surprisingly, brand value can constitute a significant percentage of a company’s market value – think Coca Cola, Microsoft and GE. And it’s not just consumer product companies. Business-to-business companies with savvy branding programs such as Intel and Boeing, among others, also reap great returns on brand investments.

This realization has led 40% of corporations surveyed by KPMG to say they will maintain a consistent level of brand investment during current market uncertainties, while another 15% will actually increase investments in brand.

These companies understand that effective brand building is cumulative and requires constant tending during good and bad times alike. During volatility, risks are higher as there are typically fewer financial and staff resources to manage brand value. Even minor mistakes can result in significant brand value devaluation. Recall that for each negative report on your brand, 12 positive responses are required to repair the damage.

When resources are scarce, brand managers must use all available methods and channels to reinforce their brand message. Thinking creatively about client and stakeholder perspective is helpful. Some actions can be more symbolic than costly: showing up to a government bail-out request in a hybrid packed with company stakeholders instead of a corporate jet, for example. Others can be more meaningful, such as replacing expensive celebrity endorsement with programs that support for local organizations or activities important to company stakeholders such as scholarship programs for laid off workers.

Too many companies simply reduce brand and marketing investments across the board during times of market uncertainty without referring to a broader strategy. This makes little sense, particularly as many competitors are similarly reducing brand investments and creating great opportunities for those willing to take calculated risks. Smaller grocery brands in the United Kingdom, for example, which maintained higher levels of marketing than their competitors during the 2001 recession, increased market share by as much as 15%. Similarly, in a little known success story, a food company new to Indonesia introduced noodles to the prominently rice eating country during the 1991 recession by selling at cost. Grateful, and now loyal, consumers gave that company a significant share of the basic food market in the country. Matching marketing needs with cash-strapped Indonesians turned out to be a simple, yet brilliant, CSR stakeholder marketing strategy.

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As a former credit union Treasurer and banker for a socially responsible bank, I remember long, intense conversations about bank culpability and the financial industry’s utter failure to serve the needs of their stakeholders, and in doing so, causing the second largest economic crisis in modern times.

Ketcham’s article reminded me of some thoughts I wrote down in early 2009 on the crisis which I offer up as a retrospective, unedited from its original form (and predictions!!).

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Clothing retailers once freely sourced products from companies employing horrid sweatshop conditions. When initially confronted, retailers claimed it was not their fault that somewhere deep in a supply chain children were abused and labor exploited.

The sub-prime mortgage fiasco in the US is nothing but more of the same: a failure on the part of financial institutions to recognize and be responsible for the social impacts of their supply chain.

Many pundits have spoken loudly about the sub-prime mortgage debacle as a failure of risk management – which, of course, it is. But the risk underlying the loans were not generated by mortgage holders, but mainly by mortgage brokers who up-sold and under explained complicated mortgages to financially unsophisticated people who, more often than not, couldn’t afford a mortgage in the first place. This is not to forget the minority of overextended amateur house flipping property developers who admittedly deserve less sympathy, but at the end of the day, leveraging them to ruin is equally irresponsible. An inevitable conclusion is that real estate brokers walked away with hefty commissions for selling a faulty product. Less generously, they engaged in ingenious financial fraud. If these mortgages were toy trains made in China, a recall would be demanded.

Trade in money is rarely viewed from a supply chain perspective however. But it is not hard to now say that financial supply chains like many others, inadvertently or not,exploit a vulnerable class of people – the poor particularly – by placing profit before socially acceptable business practice.

Risk Management Prevention?
Some say improved credit risk management would have prevented all this and that is likely true. Common human decency embedded in sound corporate social responsibility (CSR) practices would have too – morals and risk are often not mutually exclusive analytics (think of any get rich quick scheme over time).

Does anyone recall the story of the 93 year old woman taking a $500,000 mortgage based on a $2,000 monthly salary for caring for a 100 year old woman? This is neither sound lending nor is it serving the interest of any corporate stakeholders: from the institution selling the mortgage, the investors purchasing collateralized debt obligations (CDOs), or, most importantly, the client or primary stakeholder. In the end, everyone loses but mostly a poor woman.

Financial institutions have never faced the CSR scrutiny felt, for example, by the consumer retail, mining, or forestry sectors. This is partly because financial institutions don’t sell things we can touch. They buy, sell and borrow money. Their products and supply chains are sufficiently nebulous and their intermediation role in the economy is so complex that serious efforts to hold them accountable for the social and environmental impacts of their decisions have been sparse indeed.

Bankers are complicit in avoiding broader social responsibility: money, they say, doesn’t destroy rivers or pollute air; it’s the people who use it, that do. The only systemic advance of a “public good” in finance has been to improve environmental risk assessments.

This is a great start but it evinces the logical corollary of the sub-prime mess: risk and responsibility do actually lie up and down the financial supply chain. If a clothing retailer can be held accountable for ensuring supply chains are not dependent on 10 year olds paid 10 cents an hour, why shouldn’t financiers be held accountable for their part in a supply chain that exploited millions of families, investors, and innocent economic bystanders the world round? Given their importance and influence, Financials – more than other firms – should be responsible and held accountable. Was Henry Ford prescient when he said:

“Business must be run at a profit, else it will die. But when anyone tries to run a business solely for profit… then also the business must die, for it no longer has a reason for existence.”

Where are the Social Investors?
Social investors have long braved conventional opinion by judging the social and environmental performance of companies but have largely failed in the task of judging inancials by their lending record, preferring, instead to assess them on their operating CSR impact instead. Even the social investment community’s commendable work on predatory lending has been ultimately and obviously ineffective, as both a measure to protect people from poor lending practice and from a financial system supply chain perspective. The overall result has been that Financials have had a fairly free ride into social investment portfolios and an artificially strong Corporate Social Responsibility brand.

Financials are not all bad, and indeed lead in many CSR issues. CitiGroup is rightly held as a model for its pioneering work in microfinance for the poor around the world. Many financial institutions ascribe to the social and environmental guidelines of the Equator Principles’ and Global Compact’s efforts to increase the social and environmental performance of private business. Some, though too few, have innovative green and community development financial products.

But when all is said and done, the trivial amounts dedicated to these efforts is just so much window dressing on the trillions of dollars of transactions which have social and environmental impacts ranging from unintended to outright venal – evidence that CDO issuers were shorting the very products they were bringing to market makes anyone thinking otherwise complicit with the whole mess.

Know thy Stakeholder
Failing to responsibly meet the needs of one stakeholder – the client – the Financials got good and pasted as they ignored the First Law of Corporate Social Responsibility: Know Thy Stakeholder and understand their needs as they were your own. The acid test for selling a mortgage to poor person should be simple as a bank asking itself if it would take a single loan of five to six times its annual income (not profits) and accepts a leverage ratio of 50 times? None would, and not only by choice, but by law. Another test is simpler, and ironically is a guiding maxim in finance: know thy client.

It’s unfair to blame financial institutions entirely for their sub prime appetite. The 21st century of hyper short-return expectations built on a credit funded consumption economy is at root the cause. Exotic financial instruments don’t help as they have a tendency to dangerously “decouple” money from ownership and hence responsibility for impact. This makes it hard for anyone to be held accountable to inevitable social or environmental externalities. The financial corollary to these CSR observations are, as we are finding out, as damning as they are similar. Financial institutions, wrote the Economist “ploughed gleefully” into CDOs which are so poorly understood (even by their creators, it seems)….”

A responsible stakeholder driven strategy would have balanced short-term profit needs with a longer term view to providing sustainable financial services to lower income people. Serving the clients’ needs by funding affordable mortgages serves numerous benefits but above all the goal of home ownership and all the good things that come with it – intergenerational equity, financial security, stronger communities, healthier families etc.. It would have also better served the financial sector goals of building strong client relations which invariably translates into valuable long-term economic relationships (in an industry where every new client costs over $300 to obtain this is not an incidental consideration).

Two Hundred Billion Dollars and Counting Can’t be Wrong.
A stakeholder strategy would have also served the Financials best short-term interest as well. We may never be privy to the full details, but it is clearly safe to say that the total profit on sub-prime mortgages after write-offs will be exponentially less that which the Financials may have profited if they had only written “socially responsible” mortgages. Meeting what might be considered an average long-term “value stock” return of ten percent or so would have been a fait acompli.

These observations are consistent with the Second Law of Corporate Social Responsibility which says the crisis a company averts by paying attention to stakeholders is always less painful than the costs, uncertainties and legislation that certainly follows the crisis they don’t avoid. New legislation may be slow in coming but we can be assured it will be more painfully constricting than the Financials would like. We can only imagine a world where financial security is the norm as opposed to a beacon far across a vast, dark and stormy economic waterscape.

It is surprisingly inexpensive to sort out and manage stakeholder interests and claims on company. What is more, simple stakeholder engagement processes not only find risk amongst stakeholders, but almost always unearth grand opportunities as well. Mathew Kiernen of Innovest, a corporate social investment rating agency employing leading edge environment and social governance analytics, has argued and demonstrated for some time that companies that can anticipate and manage environmental and social governance issues consistently outperform those that cannot. Some of the world’s largest pension funds using Innovest’s products, naturally, agree.

Profit and Society
By virtue of a century old social compact companies have unavoidable social responsibilities and no matter what latter day “Milton Friedmanites” like to claim, making a profit has never been the sole term this contract. The internet, rising consumer affluence, social investors, super sensitive global brands, and increasingly savvy advocacy groups amongst other forces, are increasingly holding company, large or small, directly, or as part of a supply chain, over the fire of social and environmental accountability.

“Price does not rule the Web; trust does.”
From the Harvard Business Review
Cited in Profit Brand by Nick Wrenden

Banks and other financials deserve their trillion dollars spanking for not observing their social contract and the resulting Laws of Corporate Social Responsibility. Unfortunately the pain which will be disproportionally shared by the poor and middle class will continue long after the last bail out check is written. As the human face of the economic melt down precipitated by the sub prime mess emerges, we can only hope the Financials will recognize the erosion of their CSR Brand Value.

Some, nay, many, will scoff, but CSR Brand Value is real and particularly so in an age where consumer relationships and hence profitability is built more on trust than any other factor in business. Just ask British Petroleum or Royal Dutch Shell about their CSR Brand value after their respective environmental and social misadventures (e.g., Brent Spar and Nigerian oil fields, etc.). Some fifteen years after the fact, for example, Shell is still paying hefty court fees and related public relations damage surrounding its alleged complicity in the murder of Kenule “Ken” Beeson Saro-Wiwa in Nigeria. In finance, the CSR Brand Value cost to the sub prime mess will be much, much higher, even incalculable, given that in finance confidence and integrity are very highly valuable commodities.

This cannot be otherwise in the information age, where the internet is the Auto de Fe of corporate social and environmental accountability. Increasingly well informed and more often than not cynical “internet citizens” will determine the fate of a company’s CSR Brand Value, often without even having a direct stake in the company or ever having bought its product. Corporate counter propaganda will do no good as it is only so much gasoline on the fire the public’s already poor view of business.

Average Public Level of Trust for Big Business between 1970 and 2000: 27%

And just as the Gap and Nike learned pre-Internet, companies are finding quite quickly their responsibilities inescapably lie both up and down the supply chain. Only through the magnitude of the financial crisis can we now see the potential negative effects of letting money dealers off without the same type of scrutiny placed on those companies producing more tangible things.

It turns out that the Third Law of Corporate Social Responsibility, which holds social responsibility and profitability are not inversely correlated, applies quite dramatically. What is more, the benefits of CSR are not only long term. If the Financials had paid attention in late 2005 to market signals – unprecedentedly low savings rates, live credit cards sent in the mail on spec, mortgages without proof of income, the rise of informal lenders – urging them scrutinize irresponsible loan originations more closely, their shareholder’s short term profits interests would have been much better served.

This fiesta of corporate irresponsibility demonstrates, once again, the immense systemic economic risk of failing to adhere to a basic level of social responsibility. Taking this lesson to heart may just help us avert more rapidly – and profitably – the current global warming crisis, the negative outcome of which will certainly make the cost of sub prime crisis look small indeed.

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Eco friendly, fair trade, buy local are well recognized PVMs but they are not the lot of them, not by a long shot. PVM can be found in a single product for example. Dove soap and its wonderful advertisements featuring “real” women or Lego for its vocational value, are every much PVMs purchases as buying solar panels. Sometimes putting sustainability in a product or service is simply good business, here think eco-efficiencies.

It’s a bit hard to nail down how big a given PVM is or the degree of sustainability in a given product, but like the proverbial duck, you’ll know it when it quacks.  So while we can only speculate on the aggregate size of PVMs, we do know with observed certainty they are not insignificant, are growing fast, and have roots in almost every sector in the economy.

Traditionally the PVM has been identified more in terms of market types than consumer groups as is often done in conventional marketing segmentation exercises;  but simple observation tells us that two of the most influential PVM groups come from entirely different parts along the sustainability spectrum.

PostCoolers

Postcool, according to Ted Gioia in a recent edition of Adbusters  (www.adbusters.org),  is an attitude-cum-lifestyle which combines simplicity, earnestness, with downscaling lifestyles — Urban Cool meets Rural Hippy.

This, Gioia writes, contrasts with simply being “cool” the  conventional segment analog which is all about rapidly changing fashion and “accumulate lots and do it now” modus operandi (this group thrives particularly well in a credit bubble).

The era of human arrogance is at an end: the age of consequences is upon us

David Abram, quoted from Adbusters November 2011, Today as Earth Shivers into a Fever

PostCoolers are relatively small in numbers, representing perhaps less than 3% of the US marketplace, but Gioia argues they pack a substantial market leadership punch and are, in fact, driving broader and growing PVM market trends. They want authentic, natural, and easy-on-the-world goods and services, and have a penchant for less than more.

This is not the only bad news for bottom lines, Post Coolers are not known for keeping their opinions to themselves, and as Gioia notes, Post Coolers have a susceptibility to anger and confrontation, with an unstable reliance on bluntness and aggression. With the internet and protest as its tools, Post Cool is not only a market force, it’s one that punches far above its weight.

WalMart Greenies

By far, the largest PVM are the Walmart Greenies. This group is far more supply-led than demand driven, however, and typically only buy “sustainable” when all things else are equal (i.e., price). Energy efficient light bulbs, eco-friendly packaging and the odd organic chicken figure in their shopping baskets. They are best typified by Walmart shoppers (hence the nickname), who, contrary to much popular opinion amongst sustainability folk, will and do shop sustainably on a regular basis.

WalmartGreenies are highly price conscious, which is unfortunate for PVM development because it is this group, beyond almost all others, that have seen their purchasing power diminish over the last few years.  They will continue to buy sustainable when the opportunity is there, that is when retailers like Tesco, Walmart, among others, integrate sustainability value into products;  and they will continue to be the largest consumer segment purchasing sustainable, albeit and again, when the price is right.

On the Other Side of the Fence

If sustainability PVMs are growing they are still small compared to the most obviously important non-sustainability market forces.

Brandees

At the far end of the sustainability spectrum, far but oddly not that different from the PostCools are the Brandees. These folks buy the high-end brands refused on principle by the PostCoolers”; but like their antipodal counterparts, Brandees are driven less by price than by the intangible value inherent in a product, except for them it’s not public good they are looking for but status, self-image, etc.

This group is so influential there have been attempts to create and or position luxury brands as sustainable. (see The Sustainable Luxury Form for example at http://www.sustainableluxury.ch/?tag=luxury-brands).  Good thing for sustainability, Brandees are not particularly dogmatic and will most certainly respond to sustainability if brands are of high quality (not always a forte of sustainability products which have uneven reputations e.g.,  environmentally-friendly soap that doesn’t clean, eco efficient clothes dryers that don’t dry clothes etc.) and result in some contribution to their status. My rule of thumb is that if you can get a Brandee to talk about your sustainability product at a cocktail party, you are in.

But it’s not their purchasing that is terribly harmful, for as a group, Brandees consume much less in absolute terms than any other group; rather, it’s the repercussions of their down-market influence that hurts: Brandees fuel trends that drive Cool consumers but often in a way that results in shoddily made replicas produced very unsustainably (if you buy knock offs then you can think child labor, disregard for commercial law, environmental degradation etc.).

Hyper Coolers

Hyper Coolers are found in large numbers in developing world markets, where the rapidly growing middle class is naturally responding to generations of pent-up demand (poverty and deprivation) and the “cool” of international brands.  Because growth is so fast in these markets Cool is not just cool, but Hyper Cool. The Hyper-Coolers are buying cars, clothes, phones, everything and fast.  Consumption is less an activity than a lifestyle, and as a Turkish friend of mine once said, “after generations of deprivation, demand is as insatiable as a drug addiction.”

The HyperCool consumer is not only found in Developing Country markets and but in Europe and the United States as well and they aspire equally to Hyper Cool status. There numbers are legion and their impact profound.

HyperCoolers are however a bit of a hybrid as they, like the WalMartGreenies, are price sensitive which is why in many developing countries you don’t just see just brand knock offs but entire brand knock offs stores.

What this Means for CSR

I am the first to admit these market segmenting are based on nothing more than my reading of PVMs over the last several years, and that a more robust analysis would undoubtedly lead to refined observations.

I am certain, however, these classifications are not so far off, a conviction, paradoxically, centered less in my segmentation analysis than by the obviously bipolar behavior of many large companies, who, most logically want to serve both ends of the market; that is, the sustainable and the non-sustainable.

One simply cannot ignore the PostCool in America or Europe, so like Coca Cola you need to sell Coke with one hand and Odwalla Juice with the other. Pepsi does Naked Juice while for Hersey’s its Seeds of Change. At Kraft it’s a minority stake in Hain Celestial and, of course, let us not forget the biggies: Ben and Jerry’s in the Unilever fold and L’Oréal’s buy out of Body Shop… the list is long and ever larger.

Playing both ends of the flute, hedging bets, call it what you will. this Dr. Jekyll and Mr. Hyde affair with sustainability demonstrates a) the growing power of the PVMs and b) the seriousness with which some leading companies are taking them.

“Now if I do what I do not want to do, it is no longer I who do it, but it is sin living in me that does it.”

Romans 7:20

Is the Post Cool/WalmartGreenies vs Cool/HyperCool market duality igniting an inner corporate dialogue or, dare I say, conflict over what is good (sustainability) and evil (business as usual)? Is what separates the corporate “moral self” from its many sins beginning to erode?

Whichever the case, bringing disorder to light is always the first step to a cure, or one can only hope (oh, yea and buy sustainable)

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My days are filled with  people who give me great hope, though as always, time in Africa is ever so humbling.  Here one stands constantly in the monumental shadow of poverty, environmental, economic and political challenges so great its almost impossible for a foreigner to really comprehend.

Jarring sights are common. In South Sudan shiny Hummers pass by a proud school boy, books in hand wearing one running shoe and one sandal; tides of plastic bottles wash against water scarce market places juxtaposed against perfectly manicured gardens hidden behind razor wire and high brick fences.

More ominously, many African countries have suffered years of internal conflict denying whole generations opportunities most in Canada or the United States take for granted – to go to school, learn a trade, start a business.  Even when peace is achieved, the so called peace dividend is often illusive. In South Sudan, lack of  training and education leave most excluded from full economic participation as many thousands of foreigners flock to the country setting up shop, developing land, and taking the most well paid jobs. Only the most basic manual and least paid work is left for the South Sudanese who fought years for their own country. Economic exclusion is such that social disruption is not just likely but inevitable, and the only real questions are where, when and how large will it be.

Visions such as this can be quite overwhelming and could overcome one’s resolve to serve the global common good if it were not for legions of people working both in the private and public sectors throughout Africa (and internationally) to overcome the very dark forces of economic inequality and its partner in ruin ecological destruction.

Change is visible.

Here in Rwanda the government is committed to creating a middle income country.  Some compare it to Singapore. And despite a few seemingly democratic shortcomings, it’s hard to question the government’s commitment to this goal.  Many development agency people say as much, and find the government is pushing the pace of development faster than donors such as the World Bank, among others, can keep up.

While I can’t say if this is true, I can say that they are paying attention to details, so much so that my travelling colleague was asked to surrender a plastic bag while exiting the airport in compliance with the country’s no plastic bag law!

Private sector initiatives in fair trade tea and coffee are shining examples across the continent of what can be done, particularly when Western companies listen to personal values market demand for African products and services with some inherent sustainability. Microfinance institutions, some large others small, are increasingly delivering finance to low income people, helping them save, buy insurance, or make use of small credits.  Meanwhile, regional multinationals like Kenya Airways, Equity Bank, and East African Breweries evidence that African companies can compete with the best in the world.

In Africa, it would seem hope persists even as it grows side by side some of the rawest and most complex sustainability and moral challenges the world has ever seen.

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