Sustainability and The Economist: Part I

The latest issue of The Economist, not wanting to be outdone, just ran a number of articles on sustainability that are, at the very least, worth a mention. Today we tackle the first five.

In how good should your business be?, the article points out that corporate social responsibility has limits and asks if the current CSR craze is a good thing for business and for society as a whole. We do know that today, a bad name is more expensive than it has ever been – and CSR is one way companies are trying to maintain a good name. However, an inconvenient truth for today’s CSR advocates is that the connection between good corporate behavior and good financial performance is fuzzy at best. (However, as the doctor has pointed out, there appears to be a strong correlation between companies with strong brands and those that remain on the Fortune 500 unscathed year after year, so, if you can use CSR to build your brand, then there is a correlation between CSR and financial performance, even though it is not yet as strong as one would like.) Furthermore, current academic research has uncovered a direct positive link, although weak, between CSR and performance, and we can only hope that this improves with time.

In get the price right, the article focussed on Europe’s attempt to cut carbon emissions. It’s main tool is the Emissions-Trading Scheme (ETS), which is expected to be tightened significantly in the near future. The ETS issues firms permits to emit a limited amount of carbon dioxide – and if they want to emit more, they have to buy more permits. If the rest of the developed world follows suit, then companies will be pressured to cut emissions, since that’s the only way they will have to avoid steep carbon permit prices and fines. If not, the problem will just shift to other developed countries as the worst polluters leave Europe to try and sidestep the issue.

In a change in climate, the greening of corporate responsibility is addressed. The article points out that reducing greenhouse gases and responsibly using resources can save money as well as cut waste. It points out that UTC has reduced its emissions by 19% over the past 10 years while doubling output, and that they plan to cut emissions by a further 5% while growing 10% over the next year or two. It also points out that a large number of companies, including names like DuPont, REI, and GE are working hard to cut emissions and be good corporate citizens.

In the good consumer, we are told that buying ethical is not always as straightforward as it seems. Even the keenest ethical consumer faces complicated trade-offs, and sometimes the apparently obvious choice between options is the wrong one. It’s always greener to buy local, right? Wrong. For example, a study at Cranfield University showed the carbon footprint of Dutch roses, to Britons, was six times the carbon footprint of air-freight roses from Kenya – because the Dutch roses had to be grown in heated warehouses. Remember, it’s not just transportation emissions that produce greenhouse gases. Furthermore, a recent study of 1,018 products in North American stores by TerraChoice found that almost all of them were guilty of some form of “greenwashing”.

In going global, the article points out that, in one form or another, CSR is spreading around the world. The UK think tanks have been great at thought leadership, but not implementation; the American corporations, like Wal-Mart, have been great about taking action when they put their minds to it; the Japanese see it as part of their shobaido (way of doing business) and shonindo (way of the merchant) traditions, and emerging economies, where pollution has literally become a problem overnight, see it as a necessity – with China becoming the new frontier. However, although the global uptake is positive, the fact that it’s not yet consistent means that many global multi-nationals might not be able to take a one-size-fits-all approach to CSR and sustainability.