The impact of boardroom ethics, how multinational supply chains can help and some developing economy smart businesses
CR in the C-suite
“Tone from the top.” It’s one of those awful management clichés. But that doesn’t stop the idea behind the maxim having validity. This paper offers an intriguing comparative study into the relative management weight afforded to corporate responsibility in Scandinavian and US companies. The paper identifies 10 of the largest Scandinavian corporates as having a senior management-level role with “CSR” or a strict equivalent in the title.
The list includes telecoms giant Nokia in Finland and Norwegian life insurer Storebrand. The US boasts a total of 36, with bank JP Morgan Chase and carmaker Ford among the notable names. In relative terms, however, the Nordics have it, with about 7% of their largest firms giving top management billing to corporate responsibility compared with only 3% in the US.
Are these just bums on boardroom seats? Not at all, Strand argues. His research shows that those corporations with a top management team position for corporate responsibility are three times more likely to be included in the Dow Jones sustainability index than corporations with none. The paper makes no explicit claim of causation, but the correlation is a powerful one. “Corporations who care enough to divert precious resources to an issue are likely to care about it,” Strand hypothesises. “And caring about it is more likely to lead to better performance.”
It may be difficult to prove, but the link between management clout and getting the internal cogs of an organisation moving will echo with every corporate responsibility professional involved in the daily tug-of-war of conflicting priorities.
Strand, R (April 2013), “The Chief Officer of Corporate Social Responsibility: A Study of Its Presence in Top Management Teams”, Journal of Business Ethics.
What Coke can do for medicine
What can Coca-Cola’s distribution model offer in terms of global health? A lot, as it happens. Innovations such as the Coca-Cola Micro Distribution Centres ensure the US drinks company gets its product to almost every corner of the world. Swap fizzy drinks for medicine, and the potential to resolve the health barriers for the two billion people living on less than $1 per day is compelling.
Medicine distributors could do worse than start with Coca-Cola’s franchised bottler model. Working with local partners allows the company to better understand domestic distribution channels. There are also lessons to be learned from the multiplicity of Coca-Cola’s distribution channels. Most of its products, for example, are sold through a wide network of independent wholesale distributors. The medicine supply chain, in contrast, concentrates on a few tightly regulated distribution channels.
The pharmaceutical industry isn’t without its own supply side innovations. Living Goods in Uganda, which uses an Avon-like network of franchised community health agents, is a case in point. The agents provide basic health information door-to-door, while earning a living selling essential health products. The authors acknowledge the differences between the two sectors, particularly around the limitations of market-driven supply systems for medicines. All the same, Coca-Cola could be just the thing to put a bit of fizz in medicine distribution.
Yadav, P, et al (Winter 2013), “Learning from Coca-Cola”, Stanford Social Innovation Review 11 (1): 51-55.
Emerging markets’ eco-innovators
The developed world has never had a monopoly on visionaries. Based on that refreshing starting point, Boston Consulting Group and the World Economic Forum scanned the developing world for top-tier sustainable exemplars. They settled on a dozen, which are profiled in this inspiring HBR essay. All mix higher-than-average profitability with first-class sustainability. Interestingly, while some are motivated by idealism, most start out on a more pragmatic route.
India-based Shree Cement is illustrative. To save on energy costs, it tinkered with its production processes, partially replacing clinker (the material residue from coal burned at high temperatures) with waste coal slag and recycled fly ash. It re-invested the cost savings from not burning so much coal (it uses 15% less energy now than the global industry average) into technology that recycles the hot exhaust from the kiln to power its own electrical plant. Now it’s gaining revenue from selling excess electricity to the grid.
Another great example is Jain Irrigation Systems, also based in India. The company devised a micro-irrigation system suited to small farmers who are struggling with India’s increasingly irregular monsoons and subsequent water shortages. The problem was that the farmers had no capital to invest in the product, and banks would not issue them credit. So the company took a leap into wholesale agricultural commodities, guaranteeing the purchase of some of the crops its customers grew. That provided them with sufficient collateral for the banks to issue loans. The company’s new business stream now accounts for one fifth of its total revenues.
These examples and others like them are a powerful reminder of the widespread yet often overlooked eco-innovation in today’s emerging markets.
Haanaes, K, (March 2013), “Making Sustainability Profitable”, Harvard Business Review 91 (3): 110-115.
From campus
Tahar Messadi has been named the inaugural 21st century chair in sustainability for the Fay Jones School of Architecture at the University of Arkansas.
Paul Gennaro, senior vice-president and chief communications officer at California-based management support firm Aecom has joined the advisory board of Emory University's Centre for Ethics.
Academic news Business School Bulletin Oliver Balch