” If  the United Nations was fully funded why would we need the Arc or social enterprise”?

When I first read the prompt on the website, I laughed out loud due to the unrealistic and implausible assumption that the United Nations would ever be fully funded.  Why?  Simple human nature.

But I will humour whomever wrote this prompt, and make the assumption that it is indeed fully funded. However, I argue that the UN’s state of funding is not directly related to social enterprises; therefore, the need of social enterprises remains constant.

A program that is fully funded does not necessarily mean it is efficient, nor effective.  Success is not based on the amount of funding available.  Of course, money can help.  But it is hardly a determinant factor of success.

That being said, just because the United Nations is now capable of poverty alleviation, it doesn’t mean that it will successfully do so.  We need social enterprises, as they enhance the triple bottom line.

In addition, the world would still need companies that maintain corporate social responsibility.  Why?  If everyone put a little effort into making the world a better place, then how can the result be worse?

Of course, this is all theoretical.  But something that would happen for sure is the citizens’ dissatisfaction with the heads of state who contribute great monetary value to result in the UN being fully funded.

Najla recently wrote a blog post connecting the concept of Corporate Social Responsibility  to Walmart.  Her piece was a reply to Mahesh’s post, but I will focus mainly on her response and interpretation.

Walmart has continuously violated air and water pollution regulations, and thus has been forced by the U.S. government to pay millions in damages.  It is now attempting to make amends by demonstrating corporate social responsibility (CSR).  Najla’s premise is that CSR will increase long term profit; I argue that corporate social responsibility will only significantly increase profits if the public is aware of the company adopting such ethical practices.

Once there is a scandal, the company in question must rehabilitate its image in order to increase profits in the long run.  This can not be left to the saturated, and inefficient media coverage.  To get a direct message to the consumers, the company (or rather, the Marketing and PR departments) must release a campaign backing up its new position.

The perfect example: Nike.  It saw severe backlash from the public when evidence regarding its sweatshop practices was released more than a decade ago.  Instead of shying away from the allegations, Nike decided to take responsibility of the situation, and began a campaign advocating transparency, and proper working conditions.  The Business Insider presents a timeline on how Nike overcame the scandal.

The public was exposed to the fact that Nike was attempting to become more socially responsible, and thus the company managed to survive.  It managed to reposition itself in the consumers’ minds: something that is significantly more difficult to achieve than simply creating another brand that from the beginning advocates ethical practices.

I am interested in seeing the development of Walmart’s course of action: if it does not manage to successfully demonstrate to the public its new stance on ethical practices, then it would face a rejective market.

Sidebar–A Question Worth Investigating

Which is more costly: creating a new brand, or launching a corrective campaign with severe advertising to reposition the line?

I have always been interested in human resources management: how do you motivate your employees?  Why do certain people tend to slack off?  Are “free-thinking” companies (those that allow their employees to do yoga and to relax in communal gardens) less productive than the traditional office setting?  How do you get a person to do their best work, all the time?

Whenever there is a collaboration, the question of productivity arises.  In this blog post by Bruce Jones of the Disney Institute, he argues that the secret lies within employee engagement.

Intellectual property of the Disney Institute,

He argues that employees need more than health benefits and a decent paycheque.  In order for them to do their best work, they need to know that you care.  You need to demonstrate genuine concern for their wellbeing, and take their ideas into serious consideration.

It’s not a quick solution: if management was previously uncaring, and demanded results around the clock, then the company would need to “market” the management team i.e. it would need to position the managing team in the consumer’s mind (in this case, the employees!) This method takes effort on behalf of management, and it relies heavily on sincerity.  But it’s a simple concept that makes sense (at least to me): care for your employees, and they won’t want to let you down.

I think human resources is basically about keeping your employees happy.  But the difficult part is maintaining a balance between cost and happiness.  I look forward to Thursday’s class, and to our guest speaker to weigh in on this concept.

A term that is becoming increasingly popular is “Fair Trade”–you may have seen this plastered on chocolate, coffee, or tea labels around campus.  So what does Fair Trade actually mean?

A Fair Trade Certified good means it satisfies a set of criteria “including labour standards, sustainable farming, governance, and democratic participation.”  Since social enterprises enhance the triple bottom line, I found a distinct connection between these businesses and Fair Trade.

Social enterprises enhance the three pillars of sustainability: People, Planet, and Profit.  Fair Trade falls under the category of “people”, and “planet”.  By doing business with producers who engage in sustainable farming practices, and who are being treated with integrity, equality, and respect, the enterprise effectively enhances two out of the three tenets.

And if the company successfully maximizes profit, then it is at the same time enhancing the third tenet: profit.

I believe that social enterprises are much more effective in doing good for the society than large corporations that engage in environmentally, and socially costly activities (that later on recognize the problem they created, and attempt to rectify the situation by throwing a tiny portion of their profit at the problem.)

Large corporations throwing a tiny portion of their profits at a huge problem they caused.
(Source: https://pbs.twimg.com/media/Blxl_HbIEAAdUvP.jpg)

Additional reading: This news article by Fair Trade Canada explains how UBC (Canada’s first Fair Trade Campus) is trying to become more sustainable

In Jaeseung’s blog post about tobacco prices in South Korea, she mentions how the government is planning to impose a price ceiling to deter citizens from purchasing cigarettes.  The government aims to “almost double the price, and [to] eliminate all tobacco-related advertisements by January”.  Jaeseung makes the assumption that this increase in price will deter people from consuming cigarettes, thus improving the health of the general public.  I disagree with this point of view, as I believe that cigarettes are considered a relatively inelastic product due to their nature as an addictive.

Sure, there may be a reduction in the amount of cigarettes purchased through the traditional streams (convenience stores, gas stations, supermarkets, etc.) but a stream as old as the traditional market was overlooked: the black market.

An iconic photograph of Audrey Hepburn in “Breakfast at Tiffany’s” (1961), with a classic cigarette holder.
Intellectual property of Pictorial Press Ltd.

Although there is a portion of the smoking population that will only buy through legal means, there are still people who are interested in purchasing the cigarettes for cheaper.  And there is always someone who’s trying to turn a profit.

Perhaps a more effective deterrent would be mandating anti-smoking ads on the cigarette packs.  In Taiwan, there are ads printed on every pack of cigarettes depicting the effects of tobacco on lungs, and teeth.  These graphic images, in conjunction with the strict smoke-free policies, have deterred students from trying smoking.  There was a reported decrease of 4% in 2011 from 27% in 2004.

The proposal of the Enbridge pipeline has spurred opposition from not just environmental activists, but also from groups of First Nations.  The Yinka Dene Alliance claims that the proposal encompasses building on their land.

The impact of the tribes’ opposition on Enbridge’s business model can be viewed as an external factor.  But I struggled to find a category that represented the pillars of a culture’s values. The closest category I found was “societal and cultural”, under “key external trends”.  Yet it didn’t seem right.  How can I label a culture’s values as a trend?  A trend suggests a fleeting, a craze-filled sensation.  But values important to the First Nations are exactly the opposite.  Stewardship, reciprocity, and gratitude, (among other facets) are not fleeting trends.  They are embedded in the culture, in the history of the people.

It is always difficult incorporating cultural values into business models: their impact is much greater than a simple number or statistic.  Sure, one could argue a particular value, for example, the dollar amount to which certain tribes agreed in exchange for approval in the building of the pipeline.

But cultural values are worth more than that: they represent the stories passed down from the elders, the native dances, languages, and art, the pain from the settlers’ desecration of sacred relics, and the horror of residential schools.

The First Nations’ cultural values represent the rich history of their legacy entwined with the birth of Canada.

I am a candid person who believes that the person you are should be the person you are to everybody.  I disagree with companies (and people) who mask a strategic move under an act of good intention.  There is nothing wrong with making a strategic decision.  Oftentimes, it is critical in running a business.  However, I believe that the distinction between tactic and altruism must be made clear.  A corporation that I would like to analyze today is a non-profit: Project Gutenberg.

Project Gutenberg is a non-profit organization dedicated to digitalizing works already in the public domain, and to breaking down the barriers of illiteracy.  It strives to empower people by providing them free access to information so that they can lift their quality of life through education.

A value proposition of Project Gutenberg is its accessibility.  However, I believe a company’s value proposition to its consumers (see business canvas) should entail principles, so that when the consumer buys the product or the service, a value is that they are supporting a company with principles that align with their own.

In a rudimentary overview of the company’s value propositions, I would like to include “value alignment” to the list.

This is a cause I believe in, and if you have the time, I would encourage you to check out the social enterprise.

Today in class, Professor Nagarajan asked which historical event launched the personal computer.  My ears perked up, and my hand shot straight in the air.  As a self-proclaimed history buff, any mention war peaks my interest.  When he finally called on me, I blurted, “WWII”, and sat back to hear the story.

To my surprise, he did not recount the narrative of IBM and the Holocaust, but instead chose to say that the PC was developed when IBM decided to aid the American war effort.  I argue that the roots of the development of the personal computer were embedded within the machines that IBM produced to help facilitate the Holocaust.  But I digress.  For this post, I will concentrate on the relationship between IBM and the Holocaust (and not argue which side of WWII forged the development of the PC), as it ties the September 11^th class on business ethics nicely to today’s class on operations.

IBM made the Holocaust incredibly efficient.  Hitler was a diligent record keeper, and instead of going through the painful process of manually inputting entries, the solutions company managed to isolate and identify the Jewish population with unprecedented speed and precision, through automation.  Dehomag, a subsidiary of IBM, compiled a census of Prussians, recording their ancestral information on a punch card.  The information from these cards was then computed and sorted by IBM’s machines (a precursor to the computer) at a rate of 250, 000 cards per hour.

IBM helped identify and record the Jewish population in a nation-wide census, helped ensure the trains to the camps ran on time through automating the process, and helped organize the camp labour.

It is true that the Holocaust would have happened regardless of IBM’s participation.  But IBM made the operation more efficient, and dramatically increased the scale of the massacre.  In order to increase profit, Dehomag (and by consequence, IBM) disregarded morality; Dehomag crossed the unethical line.  It must have been fairly simple to refuse to help the Nazis; in major cities, Americans were protesting and boycotting anyone who did business with the German government.  Yet, the temptation of profit lured IBM to engage in business overseas, in secret.  In fact, the press did not manage to make the connection between the company and the Third Reich.  Internal memos of the company were even “encrypted”.  The language is almost indecipherable to an outsider.

///If you are interested in this narrative, and in how IBM’s involvement was finally revealed, I would encourage you to read “IBM and the Holocaust” by Edwin Black.  It can be quite dry, but the information is worth the time.///

On a somewhat related note, here’s a close-up I took of Mark I while I was studying at Harvard.

Ebola has plagued West Africa before, but this time it has proven to be the deadliest outbreak in history.  So far, the disease has killed 2,461 people in the region.  The government of Sierra-Leone has mandated a three-day lockdown in hopes of containing the outbreak, despite claims from MSF reporting that the lockdown would not help containment.

But because many West Africans are working less, there is a decrease in output, and spending capacity per household.  The economic growth is expected to plummet in Liberia, with a decrease of 11.7%, and drop in Guinea and Sierra Leone, with a decrease of 2.3% and 8.9% (respectively).  This is troublesome, as this hit would set the countries back in their economic growth, which they desperately need to improve living standards and to develop their infrastructure.

Another factor that has aided in reducing the economic output is fear, and misunderstanding.  There have been cases where citizens of these countries have attacked WHO and Red Cross members.  Some citizens still refuse to acknowledge the existence of Ebola, despite the number of lives the disease continues to claim.  Citizens expressing distrust in the government continue to feel resentment and anger towards the authorities: after the 30 August lockdown on West Point, Monrovia, citizen Boakai Passawe said that he felt “cheated of [his] work, of his life”, and that “[when] you have a child to take care of you don’t just go away from them”.

Citizens who refuse to acknowledge this disease need to start doing so immediately: education and recognition are the basis for development and growth.  It is difficult for aid workers to continue their jobs if they are under attack.

Last week, on Thursday, September 18th, three journalists and five other people including health workers were murdered, and dumped into the septic tank of a primary school in Guinea.  Aid is limited, and if we continue down this spiral of denial, the economy will not be the only thing that keeps plummeting.

But we must ask why there is so much distrust in the region.  Perhaps it has to do with the unstable ruling of the Guinean government.  Perhaps it has to do with the Guinean protest of 2009, which resulted in a massacre propagated by the government.  Trust does not come easily, especially if there was no reason to do so in the first place.

In February 2014, CVS Caremark announced its decision to stop selling tobacco starting October 2014, to promote health and well being.

Now, a month earlier than the anticipated date, not only has CVS wiped its shelves clean of nicotine, but the company has also majorly reconstructed the superficiality of its brand: on 3 September 2014, it officially changed its name from CVS Caremark to CVS Health.

Source: http://www.cvshealth.com
All trademarks belong to CVS Health Corporation; my usage of such trademarks are justified within the scope of Fair Use.

Was this seemingly ethical decision of getting rid of tobacco actually cloaking a strategic decision?

CVS, more than a decade prior to this debacle, had established Minute Clinic, a walk-in clinic within CVS stores.  This effectively branched the company from not just providing pharmaceuticals, but into practicing health care.   Minute Clinic is an alternative to waiting at the doctor’s office, or the hospital.  It’s quick, efficient, and CVS’s way of tapping into the practicing market.

Having established the intention of branching into practicing health care, it only made sense for CVS to stop the sale of tobacco.  After all, you would never see a shelf full of cigarettes for sale at the doctor’s office.  In order to gain the trust of their customers, CVS decided to eliminate these goods, and an estimated $2 billion  in sales.  What seems like a lot of money to you and I, is only a fraction of CVS’s revenue in 2013–$126.761 billion, and an infinitesimal amount of what CVS will earn by taking over parts of the medical practitioners sector.

In order to gain trust, CVS cloaked this “tapping into another industry” by rebranding itself as a health care company.  It has cloaked this seemingly ethical decision under what Friedman (“The Social Responsibility of Business is to Increase Profits“) asserts is called the “social responsibility of a business”.

But really, CVS could have just gotten Friedman’s approval by not attempting to cloak its real intentions.  What the CEO was doing all along was simply being socially responsible, by the only way a manager should be (according to Friedman), by “[using the company’s] resources…to increase its profits so long as it stays within the rules of the game”.