Archive for the ‘sustainability’ Category

Socially Responsible Investing & Value Alignment

Socially responsible investing (SRI) is a big topic, and a complex issue, one about which I cannot claim to know a lot. The basic concept is clear enough: when people make investments, they send their money out into the world to work for them. People engaged in SRI are trying to make sure that their money is, in addition to earning them a profit, doing some good in the world, rather than evil.

There are a number of kinds of SRI. For example, there are investment funds that use “negative screens” (to filter out harmful industries like tobacco), and there are “positive investment” (in which funds focus on investing in companies that are seen as producing positive social impact). We can also distinguish socially-responsible mutual funds from government-controlled funds, such as pension funds.

(For other examples, check out the Wikipedia page on the topic, here.)

Setting aside the kinds of distinctions mentioned above, I think we can usefully divide socially responsible investments into two categories, from an ethical point of view, rooted in 2 different kinds of objectives.

On one hand, there’s the kind of investment that seeks to avoid participating in what are relatively clear-cut, ethically bad practices. For example, child slavery. Trafficking in blood diamonds might be another good example. Responsible investment in this sense means not allowing your money to be used for what are clearly bad purposes. In this sense, we all ought to engage in socially-responsible investment.

(Notice that investments avoiding all child labour do not fall into the above category, because child labour, while always unfortunate, is not always evil. There are cases in which child labour is a sad necessity for poor families.)

On the other hand, there’s what we might call “ethical alignment” investments, in which a particular investor (small or large) attempts to make sure their money is invested only in companies or categories of companies that are consistent with their own values. Imagine, for example, a hard-core pacifist refusing to invest in companies that produce weapons even for peace-keeping purposes. Or picture a labour union investing only in companies with an excellent track-record in terms of labour relations. In such cases, the point is not that the corporate behaviour in question is categorically good or bad; the point is that they align (or fail to align) with the investor’s own core values.

I’m sure someone reading this will know much more about SRI than I do. Is the above distinction one already found in that world?

Critical Thinking in Business Ethics, Part 2: Argument Analysis

This is the 2nd in a series of postings on the role of critical thinking in business ethics.

(Coincidentally, a story has been in the news recently about how poorly most US college students do at acquiring critical thinking skills during their post-secondary years. See: Study: Students slog through college, but don’t gain much critical thinking.)

One of the absolutely fundamental skills of critical thinking is argument analysis, or the interpretation of argument structure. And the fundamental elements of argument structure are argument premises and conclusions.

In everyday language, the word “argument” means a heated debate. When 2 people are “having an argument,” they’re disagreeing with each other. But the other meaning of the word “argument,” the one with which critical thinking is especially concerned, is this: an “argument” is a series of statements, in which some of those statements (called “premises”) are offereds as support for or reasons to believe another of the statements (called the “conclusion.”) It takes 2 to tango, but it takes just 1 to put forward an argument.

Understanding the structure of an argument is a very good step towards understanding its strengths and weaknesses. Knowing, for example, that a given argument has 3 distinct premises rather than just 1, is clearly pretty fundamental to looking for its weaknesses: the more premises it has, for example, the more possible points of critique. But more fundamental than that, even, is the idea that we simply gain a better appreciation of someone’s point if we can picture — even in a simplified graphical way — the shape of their argument.

Look, for example, at this argument:

The definition of “sustainability” is unclear. Also, sustainability is just one of many important ethical values. So, we should not judge a business entirely by its sustainability ranking.

We can represent this argument graphically, by means of a diagram, as follows:

The arrows in this diagram represent the author’s intended logical “flow” — they can be read as representing the word “therefore.” This argument has 2 premises, each of which lends at least some support to the conclusion. (The fact that there are 2 arrows indicates that there are 2 separate chains of logic here; each premise gives some reason to believe the conclusion.) At this stage all we are doing is sketching the shape of the argument; we are not yet engaging in a critique. But from a critical perspective, this means that if you find fault with one of the premises, the conclusion is still supported — at least to some extent — by the other.

Next, compare that one to this argument:

A tax on dividends means that corporate profits are taxed twice. And taxing the same money twice is unfair. So, a tax on corporate dividends is unfair.

That argument can be diagrammed as follows:

This argument also has 2 premises. But notice that (as implied by the line joining them, and the single arrow flowing from that line to the argument’s conclusion) these 2 premises are working together. They need each other in order to lend support to the argument’s conclusion. This means that a convincing criticism of either one of those premises robs the argument of all of its force. That’s not to say that the conclusion is false; it’s just to say that this argument can’t support the conclusion, if even one of its premises is in doubt.

Now, those are very very simple arguments, and the style of analysis suggested here is not exactly profound. But the simple act of sketching out the shape of an argument — your own or someone else’s — is useful in making clear just how much support the argument does or doesn’t have, and where its critical weak points may be. And agreeing on that is a crucial part of getting debates over business ethics beyond the foot-stomping stage.

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The diagramming method used here is adapted from Lewis Vaughn and Chris MacDonald, The Power of Critical Thinking, 2nd Canadian Edition, Oxford University Press, 2010.

Sustainability Rankings, the Global 100, and Greenwashing

What’s so sustainable about the Global 100 “World’s Most Sustainable Companies”? Not much, as far as I can see.

The ranking was released just a few days ago, as reported here by Helen Coster for Forbes: Ranking The World’s Most Sustainable Companies

The term “sustainable”–like “green” and “all-natural” before it–conveys an abstract sense of do- gooding that many companies have been happy to adopt. Corporate Knights, a Toronto-based media company, applies hard metrics to the otherwise fuzzy term, and Saturday it released its seventh-annual list of the world’s most sustainable companies….

So, what does sustainability mean, here? Toby Heaps, Corporate Knights’ editor-in-chief, says one key is to ask this question: “how are companies squeezing more wealth from the resources that they use?” So far so good — I suspect that kind of efficiency measure has something to do with what most people take “sustainability” to mean. But next Heaps strays into strange territory when he asks, in addition, “How are they doing a better job of respecting the social contract, like paying taxes or having diverse leadership?” Huh? We’ll get back to the issue of criteria in a moment. First let’s look at the rankings.

The top end of the list is dominated by global brands from the telecommunication, pharmaceutical, and energy industries (Nokia, Johnson & Johnson and Intel are all in the top 5). But an oil company takes top honours (Norwegian oil and gas company Statoil). Yes, an oil company. Now, for many people, the petroleum industry is the epitome of unsustainable business. So this will immediately raise alarms for some people. Should it? Let’s take a closer look.

The Forbes story says that Statoil topped the list “thanks in part to improvements in its water productivity.” Fair enough: water productivity (efficiency of water use) is a clear sustainability issue. But what comes next is odd. The oil company apparently did well in the ranking in part because it is “also a healthy contributor to Norway’s coffers and has a diverse board”. In other words, this oil company scored well on a sustainability ranking by doing a whole bunch of stuff that has little to nothing to do with sustainability.

For still more detail, we can look at the ranking and an explanation of the methodology behind it on the Global 100 website. According to the Methodology page, the ranking is established by looking at “environmental, social, governance (ESG) and financial data.” Already we see here a rather expansive understanding of the word “sustainability.” Next, let’s look at specific measures they used.

Some of the metrics used make perfect sense, such as energy productivity and waste productivity. Some of them, however, are hard to figure, such as CEO-to-average-worker pay ratio. Executive compensation is an interesting (and, I think, complicated) ethical issue, but how does it relate to sustainability? The detailed explanation of the various criteria offers this rationale:

A disproportionate share of compensation expenditure going to one person can lead to lower overall workforce motivation, and can also be indicative of potential governance risks, or misalignments of interests.

All of that seems true, but largely irrelevant. Sure, those risks are real, and they may (may!) have something to do with keeping the company in business. But surely that is not what anyone beyond a handful of consultants means by the word “sustainability.” When the public wonders whether Walmart’s business is “sustainable,” they are certainly not wondering whether the company’s business practices are going to let them keep chugging along.

Another mystifying criterion is “Leadership Diversity: % of women board directors.” Again, that’s an important issue; companies need to do more to get women into senior leadership positions, including on the board. But is there really a clear link — either conceptual or empirical — between having women on the board and the company being sustainable? Unfortunately, while that criterion is mentioned on the Criteria & Weights page, it is missing entirely from the more detailed explanation of those criteria (see PDF document here) so what the link is supposed to be is anyone’s guess.

Other weird criteria include “Safety Productivity”, “% tax paid” and “Innovation Capacity,” though the latter makes at least a modicum of sense. As far as I can see, fully half of the ten criteria used have no clear link to sustainability. And given that all criteria are given equal weight in the Global 100 methodology, that means the ranking is actually only half about sustainability, and half about other stuff.

Now, I’ve been critical of the term “sustainability” before (see “Sustainability is Unustainable.”) A lot of what I’ve said before has to do with confusion over the meaning of the term, and the resulting difficulty in measuring and tracking companies’ performance in this area. I think the Global 100 ranking ends up providing a wonderful case in point.

But the real problem, here, is that the kind of sustainability measure instantiated by the Global 100 profits directly from the confusion over the meaning of the term “sustainability.” (And I do mean “profits” — Corporate Knights is a for-profit organization, as presumably are the research firms that helped develop the Global 100 and the vast majority of sustainability consultants who help companies preen for such rankings.) Now, I don’t actually have anything against profits, and I’m not impugning anyone’s intentions. My point is that the only reason this particular set of measures can be thought to add up to “sustainability” is that the term itself is ambiguous and means different things to different people.

What’s really being measured here is a broad range of indicators having to do with all kinds of things. Again, it includes “environmental, social, governance…and financial data.” And it’s all important stuff. So the Global 100 ranking really does tell us something important (but vague) about the companies listed. But what is announced is that ‘these companies are sustainable.’ What does that mean to the public? Environment. So the list implies that these companies are environmental good guys. The result: greenwash.

So, what’s the public to do? Maybe all the public can do is realize that what sustainability consultants and gurus mean by “sustainability” has relatively little to do with what they mean by that word.

Sustainability is Unsustainable

I was tempted to call this blog entry “Sustainability is Stupid,” but I changed my mind because that’s needlessly inflammatory. And really, the problem isn’t that the concept itself is stupid, though certainly I’ve seen some stupid uses of the term. But the real problem is that it’s too broad for some purposes, too narrow for others, and just can’t bear the weight that many people want to put on it. The current focus on sustainability as summing up everything we want to know about doing the right thing in business is, for lack of a better word, unsustainable.

Anyway, I am tired of sustainability. And not just because, as Ad Age recently declared, it’s one of the most jargon-y words of the year. Which it is. But the problems go beyond that.

Here are just a few of the problems with sustainability:

1) Contrary to what you may have been led to believe, not everything unsustainable is bad. Oil is unsustainable, technically speaking. It will eventually get scarce, and eventually run out, for all intents and purposes. But it’s also a pretty nifty product. It works. It’s cheap. And it’s not going away soon. So producing it isn’t evil, and using it isn’t evil, even if (yes, yes) it would be better if we used less. Don’t get me wrong: I’m no fan of oil. It would be great if cars could run on something more plentiful and less polluting, like sunshine or water or wind. But in the meantime, oil is an absolutely essential commodity. Unsustainable, but quite useful.

2) There are ways for things to be bad other than being unsustainable. Cigarettes are a stupid, bad product. They’re addictive. They kill people. But are they sustainable? You bet. The tobacco industry has been going strong for a few hundred years now. If that’s not sustainability, I don’t know what is. To say that the tobacco industry isn’t sustainable is like saying the dinosaur way of life wasn’t sustainable because dinosaurs only ruled the earth for, like, a mere 150 million years. So, it’s a highly sustainable industry, but a bad one.

3) There’s no such thing as “sustainable” fish or “sustainable” forests or “sustainable” widgets, if by “sustainable” you mean as opposed to the other, “totally unsustainable” kind of fish or forests or widgets. It’s not a binary concept, but it gets sold as one. A fishery (or a forest or whatever) is either more or less sustainable. So to label something “sustainable” is almost always greenwash. Feels nice, but meaningless.

4) We’re still wayyyy unclear on what the word “sustainable” means. And I’m not talking about fine academic distinctions, here. I’m talking big picture. As in, what is the topic of discussion? For some people, for example, “sustainability” is clearly an environmental concept. As in, can we sustain producing X at the current rate without running out of X or out of the raw materials we need to make X? Or can we continue producing Y like this, given the obvious and unacceptable environmental damage it does? For others, though — well, for others, “sustainability” is about something much broader: something economic, environmental, and social. This fundamental distinction reduces dramatically the chances of having a meaningful conversation about this topic.

5) Many broad uses of the term “sustainable” are based on highly questionable empirical hypotheses. For example, some people seem to think that “sustainable” isn’t just an environmental notion because, after all, how can your business be sustainable if you don’t treat your workers well? And how can you sustain your place in the market if you don’t produce a high-quality product? Etc., etc. But of course, there are lots of examples of companies treating employees and customers and communities badly, and doing so quite successfully, over time-scales that make any claim that such practices are “unsustainable” manifestly silly. (See #2 above re the tobacco industry for an example.)

6) We have very, very little what is actually sustainable, environmentally or otherwise. Sure, there are clear cases. But for plenty of cases, the correct response to a claim of sustainability is simply “How do you know?” We know a fair bit, I think, about what kinds of practices tend to be more, rather than less, environmentally sustainable. But given the complexities of ecosystems, and the complexities of production processes and business supply chains, tracing all the implications of a particular product or process in order to declare it “sustainable” is very, very challenging. I conjecture that there are far, far more claims of “sustainability” than there are instances where the speaker knows what he or she is talking about.

7) Sometimes, it’s right to do the unsustainable thing. For example, would you kill the last breeding pair of an endangered species (say, bluefin tuna, before long) to feed a starving village, if that was your only way of doing so? I would. Sure, there’s room for disagreement, but I think I could provide a pretty good argument that in such a case, the exigencies of the immediate situation would be more weighty, morally, than the long-term consequences. Now, hopefully such terrible choices are few. But the point is simply to illustrate that sustainability is not some sort of over-arching value, some kind of trump card that always wins the hand.

8 ) The biggest, baddest problem with sustainability is that, like “CSR” and “accountability” and other hip bits of jargon, it’s a little wee box that people are trying to stuff full of every feel-good idea they ever hoped to apply to the world of business. So let’s get this straight: there are lots and lots of ways in which business can act rightly, or wrongly. And not all of them can be expressed in terms of the single notion of “sustainability.”

Now, look. Of course I don’t have anything against sustainability per se. I like the idea of running fisheries in a way that is more, rather than less, sustainable. I like the idea of sustainable agriculture (i.e., agriculture that does less, rather than more, long-term damage to the environment and uses up fewer, rather than more, natural resources). But let’s not pretend that sustainability is the only thing that matters, or that it’s the only word we need in our vocabulary when we want to talk about doing the right thing in business.

Greenpeace, Tar Sands and “Fighting Fire With Fire”

Do higher standards apply to advertising by industry than apply to advertising by nonprofits? Is it fair to fight fire with fire? Do two wrongs make a right?

See this item, by Kevin Libin, writing for National Post: Yogourt fuels oil-sands war.

Here’s what is apparently intolerable to certain environmental groups opposed to Alberta’s oil sands industry: an advertisement that compares the consistency of tailings ponds to yogourt.

Here’s what is evidently acceptable to certain environmental groups opposed to Alberta’s oil sands industry: an advertisement warning that a young biologist working for Devon Energy named Megan Blampin will “probably die from cancer” from her work, and that her family will be paid hush money to keep silent about it….

It’s worth reading the rest of the story to get the details. Basically, the question is about the standards that apply to advertising by nonprofit or activist groups like the Sierra Club and Greenpeace. But it’s also more specifically about whether it’s OK for such groups to get personal by including in their ads individual employees of the companies they are targeting.

A few quick points:

  • Many people think companies deserve few or no protections against attacks. Some people, for example, think companies should not even be able to sue for slander or libel. Likewise, corporations (and other organizations) do not enjoy the same regulatory protections and ethical standards that protect individual humans when they are the subjects of university-based research. Corporations may have, of necessity, certain legal rights, but not the same list (and not as extensive a list) as the list of rights enjoyed by human persons. So people are bound to react differently when activist groups attack (or at least name) individual human persons, as opposed to “merely” attacking corporations.
  • Complicating matters is the fact that the original ads (by Canadian Association of Petroleum Producers, or CAPP) themselves featured those same individual employees. So the employees had presumably already volunteered to be put in the spotlight. But of course, they volunteered to be put in the spotlight in a particular way.
  • For many people, the goals of the organizations in question will matter. So the fact that Greenpeace and the Sierra Club are trying literally to save the world (rather than aiming at something more base, like filthy lucre) might be taken as earning them a little slack. In other words, some will say that the ends justify the means. On the other hand, the particular near-term goals of those organizations are not shared by everyone. And not everyone thinks that alternative goals (like making a profit, or like keeping Canadians from freezing to death in winter) are all that bad.
  • Others might say that, being organizations explicitly committed to doing good, Greenpeace and the Sierra Club ought to be entirely squeaky-clean. If they can’t be expected to keep their noses clean, who can? On the other hand, some might find that just a bit precious. Getting the job done is what matters, and it’s not clear that an organization with noble goals wins many extra points for conducting itself in a saintly manner along the way.

(I’ve blogged about the tar sands and accusations of greenwashing, here: Greenwashing the Tar Sands.)

Thanks to LW for sending me this story.

Ethics: Definition

“Ethics” can be defined as the critical, structured examination of how we should behave — in particular, how we should constrain the pursuit of self-interest when our actions affect others.

“Business Ethics” can be defined as the critical, structured examination of how people & institutions should behave in the world of commerce. In particular, it involves examining appropriate constraints on the pursuit of self-interest, or (for firms) profits, when the actions of individuals or firms affects others.

The “critical” and the “structured” parts of those definitions are both important:

  • Ethics is critical in the sense of having to do with examining and critiquing various moral beliefs and practices. (In other words, it’s not just about describing people’s values or behaviour, though that can be a useful starting point.) Ethics involves looking at particular norms and values and behaviours and judging them, asking whether various norms and values are mutually contradictory, and asking which ones matter more in what sorts of situations.
  • Ethics is structured in the sense that it’s not just about having an opinion about how people should behave. Everyone has opinions. Ethics involves attempting, at least, to find higher-order principles and theories in an attempt to rationalize and unify our diverse moral beliefs.

For practical purposes, ethics means providing reasoned justification for our choices & behaviour when it affects others, and reasoned justification for our praise or criticism of other people’s behaviour.

Now, nothing above constitutes an argument. I’m just explaining roughly the proper use of the term “ethics.” There are, of course, other uses of that term — some of them arguably regrettable. (Some people in business and government, for example, take the word “ethics” to refer exclusively to the rules set out in various “ethics laws” that govern the behaviour of individuals in positions of responsibility, rules about conflict of interest, bribery, and so on.)

So, here comes the contentious part. I’m not sure it really is or should be contentious, but some people are bound to disagree with it.

The breadth of the topic “business ethics,” as defined above, means that other, related ideas like Corporate Social Responsibility (CSR) and corporate citizenship and sustainability are in fact sub-topics within the broader topic of business ethics. That’s not to diminish the importance of those sub-topics. But it’s worth keeping in mind, because it means that a focus on any one of those topics means setting aside potentially-important issues that fall under a different heading. This is especially true when companies (and consultants) focus on just one term. When they do that, it’s worth wondering, and maybe asking pointedly, about the stuff they’re leaving out.

Edited for clarity in October, 2011.

Taking Your Hybrid to the Carwash Greenwash

Wired featured the following story yesterday: Hybrids, We Never Knew Ya (by John Gartner), about the fact that not all “hybrid” cars are as environmentally progressive as the name seems to imply.

Marketers are jumping on the green-car movement and the gears are audibly grinding over what counts as a “hybrid vehicle.”

First applied to small sedans emphasizing fuel economy, the term is now blithely used to encompass a vast array of trucks, SUVs and luxury cars that in some cases offer only modest fuel savings over traditional vehicles, some critics charge.

Scott Nathanson, the national field organizer for environmental activist group the Union of Concerned Scientists (or UCS), contends the term “hybrid” is confusing at best and misleading at worst. “People think that it if you slap a hybrid label on something, that makes it a green vehicle,” he said. Not so.

According to UCS, the upcoming 2007 Saturn Vue Green Line SUV along with the GMC Sierra and Chevy Silverado hybrids, make claims that are “hollow” and classify them as “mild hybrids” that should not be considered the same class of vehicles.

Nathanson said that while the Saturn Vue hybrid includes useful fuel-saving features such as deactivating cylinders when not in use and shutting off the engine while idling, a hybrid should include a battery with a minimum of 60 volts of electricity. By way of comparison, the Saturn hybrid’s batteries (produced by Ovonics’ subsidiary Cobasys) are rated at 36 volts, while the Toyota Camry hybrid includes 244-volt batteries.

While hybrid vehicles from Honda, Toyota, Ford and Lexus include battery packs that can recover substantial amounts of energy from the braking system (known as regenerative braking), the Saturn hybrid battery pack “doesn’t have sufficient power to provide an assist to the engine,” according to Nathanson.

The worry, here, is that at least some so-called “hybrids” are being promoted as part of an effort at “Greenwashing.” “Greenwashing” is a pejorative term derived from the term “whitewashing,” coined by environmental activists to describe efforts by corporations to portray themselves as environmentally responsible in order to mask environmental wrongdoings. (Melissa Whellams & I have written an article on Greenwashing in the forthcoming Encyclopedia of Business Ethics & Society) So, it seems in this case, certain auto manufacturers (some with really awful environmental records) are putting a handful of vehicles on the market that can technically qualify as “hybrids”. By doing so, the companies stand to improve their reputation in terms of environmental performance, without actually making any real commitment to improving actual environmental performance.
The problem with accusations of greenwashing, of course, is that a lot depends on a corporation’s intentions, and intentions are notoriously difficult to read. If a given company produces just a handful of hybrid cars, while churning out gas-guzzling SUV’s by the millions, is that deceptive greenwashing or the first step towards real improvements? If a company markets what the story above calls a “mild hybrid” (one with an electrical system too weak to do much good), is that a half-hearted effort, or an engineering stepping-stone to something better?

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