Deck 12: Strategizing With Corporate Social Responsibility

Question 1

Whole Foods' John Mackey on Conscious Capitalism
After dropping out of the University of Texas at Austin, John Mackey co-founded Safer Way Natural Foods store in Austin in 1978. In 1980, Safer Way merged with a competitor to become Whole Foods, one of the country's first natural foods supermarkets. Thirty years and 15 acquisitions later, Whole Foods dominates natural foods retailing and has become an iconic brand in the United States. It is expanding in the United Kingdom as well. Its purchasing standards and priorities shape agricultural practices around the world. The outspoken Mackey, who is a self-styled guru on conscious capitalism, was interviewed by Harvard Business Review :
What is conscious capitalism?
First, you have to understand the basic principles that help capitalism flourish. One is property rights. You need the ability to trade your property, and to trade it to pretty much whoever you want. Another is the rule of law-laws and regulations that are well understood so that you can factor them into your business decisions. The rule of law has to be applied equally to everyone. For example, if Whole Foods goes into a city and is told our cheese has to be refrigerated, it's fundamentally unjust if that rule isn't applied to our competitors as well-which, I might add, does sometimes happen in New York City. You also need to have conscious businesses-that is, businesses that become conscious of their higher purpose, which is not just about maximizing profits and shareholder value.
Second, you have to recognize the stakeholder model: Customers, employees, investors, suppliers, larger communities, and the environment are all interdependent. You operate the business in such a way that it's not a zero-sum game.
Third, you need what we call conscious leadership. You could also call it servant leadership. Leaders identify their own flourishing with the flourishing of the organization. They're trying to serve the organization and its purpose.
Fourth, you have to create a conscious culture-a culture that allows the organization to fulfill its higher purpose, implements the stakeholder model, and enables conscious leadership to flourish.
So, what are the core principles of Whole Foods, and where do they come from?
I think business enterprises are like any other communities. They can aspire to the highest values that have inspired humans throughout time. You can use different value models, but I like Plato's the good, the true, and the beautiful. Add the heroic to that-meaning changing and improving the world and standing up for what you believe is true and right and good. I think Whole Foods's highest purpose is a heroic one: to try to change and improve our world. That is what animates me personally. That is what animates the company. I resisted that purpose for a long time, by the way. I actually thought we were in some variant of service- that was really about fulfilling the good. The team members consistently told me I was wrong, that we had a different purpose. It was this more heroic purpose.
In terms of the age-old debate about whether companies exist for the shareholders or for something else, is there one group? Is it customers? Is it employees? Or is it purpose?
That gets back to the second principle of conscious capitalism-the stakeholder model. I think it's deep in human nature to think in terms of the zero sum. If one stakeholder is winning, someone else must be losing. It comes from sports, where there is one winner and lots of losers, and this idea of a fixed pie, where if someone is getting a bigger share, someone else has to be getting a smaller piece, and what's needed for social justice is to make sure people get equal pieces. But a conscious business recognizes that you can have an expanding pie, and potentially everyone can get a larger piece.
I'll give you a simple example: management's job atWhole Foods is to make sure that we hire good people, that they are well trained, and that they flourish in the workplace, because we found that when people are really happy in their jobs, they provide much higher degrees of service to the customers. Happy team members result in happy customers. Happy customers do more business with you. They become advocates for your enterprise, which results in happy investors.
That is a win, win, win, win strategy. You can expand it to include your suppliers and the communities where you do business, which are tied in to this prosperity circle. A metaphor I like is the spiral, which tends to move upward but doesn't move in a straight line.
HBR's pages are full of discussions about how sustainability is becoming a competitive advantage. Do you believe that?
I do think sustainability is a way to compete. I don't think it's the most important way. I see it as more of a niche. It reflects the consciousness of your customers, and the truth is that most customers don't care about it. Most customers at the end of the day care mostly about price. That consciousness is still dominant out there. But there is a growing consciousness about things like environmental sustainability and animal welfare. When we started out, 30 years ago, organic was a niche, and most people didn't know what it was. But I would say that partly because of Whole Foods' success, organic is now very much in the national consciousness.
More recently, Whole Foods has gotten behind the emphasis on local agriculture and has helped to popularize it. Wal-Mart is beginning to pay attention to this also, so in a lot of ways Whole Foods is helping to evolve the agricultural system in the United States.
Source: Excerpts from J. Mackey, 2011, What is it that only I can do? Harvard Business Review , January: 119-123.
What are Whole Foods' firm-specific resources and capabilities that underpin its success?

Answer 1

Corporate social responsibility (CSR):
Corporate social responsibility is a practice where corporate integrates environment and social concerns in business functions.
W Foods firm:
W foods firm is a supermarket that emphasizes organic and natural foods. It has been recognized as the socially responsible firm. It is also ranked third on the list of environmental protection agency of the United States. This supermarket chain trades poultry and meat with free of antibiotics and hormonal growth. It also trades unprocessed cereals and grains.
Resources and capabilities of W Foods firm:
• The resources and capabilities of W foods firm involve supporting team members and satisfying customer to attain happiness and excellence. The primary purpose of the firm is to create wealth through growth and profits.
• The firm also shows programs regarding the environment commitment. It also involved in various development programs regarding community.
• The development programs aims to educate the significance of nutritious and fresh meals specifically to avoid childhood obesity

Question 2

ON ETHICS: Between the two opposing views (CSR does not create value versus CSR can create value), which view do you support? Why?

Answer 2

Corporate social responsibility (CSR):
Corporate social responsibility is a practice where corporate integrates environment and social concerns in business functions.
In the viewpoint of K:
According to K's strategy, the suggestion that companies have a responsibility to address social ailing is a defected one. By taking this approach, it is possible to disregard the real solutions to these difficulties. According to the view of K, the concentration on social responsibility will discourage the effective measures to improve social welfare. He also believes that corporate social responsibility programs should be arranged with consumer demand and profit.
In the viewpoint of P:
According to P, capitalism concept could be used to deal with social problems. When the sustainable environmental policies are executed, the costs of production will be significantly less. Companies can realize the benefits and efficiencies by arranging their product strategies. He believes that capitalism with corporate social responsibility (CSR) will help to meet the challenges of society.
Conclusion:
Corporate social responsibility helps the business in making good profits. It also provides a basis of differentiation in the global market. This helps the company to create goodwill among customers and other regulatory agencies. Hence, the views of P is acceptable.

Question 3

ON ETHICS: In the landmark Dodge v. Ford case in 1919, the Michigan State Supreme Court determined whether Henry Ford could withhold dividends from the Dodge brothers (and other shareholders of the Ford Motor Company) to engage in what today would be called CSR activities. With a resounding "No," the court opined that "A business organization is organized and carried on primarily for the profits of the stockholders." If the court in your country were to decide on this case this year (or in 2019), what do you think would be the likely outcome?

Answer 3

Corporate social responsibility (CSR):
Corporate social responsibility is a practice where corporate integrates environment and social concerns in business functions.
Decision on corporate social responsibility (CSR) activities:
Most of the people in the United States will not question on the rights and responsibilities of a firm in making reasonable donations out of their profit. In legal, it is believed within the area of company's top management to make such decisions.
From the viewpoint of shareholders, it may either agree or disagrees. Most of the shareholders may oppose in funding of nonprofit organizations (NGOs). From the viewpoint of judge in such case, it is considered that making donation or involving in CSR activities is up to the shareholders and top management of the company.

Question 4

Whole Foods' John Mackey on Conscious Capitalism
After dropping out of the University of Texas at Austin, John Mackey co-founded Safer Way Natural Foods store in Austin in 1978. In 1980, Safer Way merged with a competitor to become Whole Foods, one of the country's first natural foods supermarkets. Thirty years and 15 acquisitions later, Whole Foods dominates natural foods retailing and has become an iconic brand in the United States. It is expanding in the United Kingdom as well. Its purchasing standards and priorities shape agricultural practices around the world. The outspoken Mackey, who is a self-styled guru on conscious capitalism, was interviewed by Harvard Business Review:
What is conscious capitalism?
First, you have to understand the basic principles that help capitalism flourish. One is property rights. You need the ability to trade your property, and to trade it to pretty much whoever you want. Another is the rule of law-laws and regulations that are well understood so that you can factor them into your business decisions. The rule of law has to be applied equally to everyone. For example, if Whole Foods goes into a city and is told our cheese has to be refrigerated, it's fundamentally unjust if that rule isn't applied to our competitors as well-which, I might add, does sometimes happen in New York City. You also need to have conscious businesses-that is, businesses that become conscious of their higher purpose, which is not just about maximizing profits and shareholder value.
Second, you have to recognize the stakeholder model: Customers, employees, investors, suppliers, larger communities, and the environment are all interdependent. You operate the business in such a way that it's not a zero-sum game.
Third, you need what we call conscious leadership. You could also call it servant leadership. Leaders identify their own flourishing with the flourishing of the organization. They're trying to serve the organization and its purpose.
Fourth, you have to create a conscious culture-a culture that allows the organization to fulfill its higher purpose, implements the stakeholder model, and enables conscious leadership to flourish.
So, what are the core principles of Whole Foods, and where do they come from?
I think business enterprises are like any other communities. They can aspire to the highest values that have inspired humans throughout time. You can use different value models, but I like Plato's the good, the true, and the beautiful. Add the heroic to that-meaning changing and improving the world and standing up for what you believe is true and right and good. I think Whole Foods's highest purpose is a heroic one: to try to change and improve our world. That is what animates me personally. That is what animates the company. I resisted that purpose for a long time, by the way. I actually thought we were in some variant of service- that was really about fulfilling the good. The team members consistently told me I was wrong, that we had a different purpose. It was this more heroic purpose.
In terms of the age-old debate about whether companies exist for the shareholders or for something else, is there one group? Is it customers? Is it employees? Or is it purpose?
That gets back to the second principle of conscious capitalism-the stakeholder model. I think it's deep in human nature to think in terms of the zero sum. If one stakeholder is winning, someone else must be losing. It comes from sports, where there is one winner and lots of losers, and this idea of a fixed pie, where if someone is getting a bigger share, someone else has to be getting a smaller piece, and what's needed for social justice is to make sure people get equal pieces. But a conscious business recognizes that you can have an expanding pie, and potentially everyone can get a larger piece.
I'll give you a simple example: management'sjob atWhole Foods is to make sure that we hire good people, that they are well trained, and that they flourish in the workplace, because we found that when people are really happy in their jobs, they provide much higher degrees of service to the customers. Happy team members result in happy customers. Happy customers do more business with you. They become advocates for your enterprise, which results in happy investors.
That is a win, win, win, win strategy. You can expand it to include your suppliers and the communities where you do business, which are tied in to this prosperity circle. A metaphor I like is the spiral, which tends to move upward but doesn't move in a straight line.
HBR's pages are full of discussions about how sustainability is becoming a competitive advantage. Do you believe that ?
I do think sustainability is a way to compete. I don't think it's the most important way. I see it as more of a niche. It reflects the consciousness of your customers, and the truth is that most customers don't care about it. Most customers at the end of the day care mostly about price. That consciousness is still dominant out there. But there is a growing consciousness about things like environmental sustainability and animal welfare. When we started out, 30 years ago, organic was a niche, and most people didn't know what it was. But I would say that partly because of Whole Foods' success, organic is now very much in the national consciousness.
More recently, Whole Foods has gotten behind the emphasis on local agriculture and has helped to popularize it. Wal-Mart is beginning to pay attention to this also, so in a lot of ways Whole Foods is helping to evolve the agricultural system in the United States.
Source : Excerpts from J. Mackey, 2011, What is it that only I can do? Harvard Business Review , January: 119-123.
From an institution-based view, how would you characterize Whole Foods' strategy featuring its "heroic" purpose to "try to change and improve our world"?

Question 5

ON ETHICS: Your CPA firm is organizing a one-day-long CSR activity using company time, such as cleaning up a dirty road or picking up trash on the beach. A colleague tells you: "This is so stupid. I already have so much unfinished work. Now to take a whole day away from work? Come on! I don't mind CSR. If the company is serious about CSR, why don't they donate one day of my earnings, which I am sure will be more than the value I can generate by cleaning up the road or picking up trash? With that money, they can just hire someone to do a better job than I would." What are you going to say to her? (Your colleague makes $73,000 a year and on a per-day basis she makes $200.)

Question 6

ON ETHICS: Some argue that investing in emerging economies greatly facilitates economic development at the base of the global economic pyramid. Others contend that moving jobs to low-cost countries not only abandons CSR for domestic employees and communities in developed economies, but also exploits the poor in these countries and destroys the environment. If you were (1) CEO of an MNE headquartered in a developed economy, (2) the leader of a labor union in the home country of the MNE mentioned here that is losing a lot of jobs, or (3) the leader of an environmental NGO in the low-cost country in which the MNE invests, how would you participate in this debate?

Question 7

Whole Foods' John Mackey on Conscious Capitalism
After dropping out of the University of Texas at Austin, John Mackey co-founded Safer Way Natural Foods store in Austin in 1978. In 1980, Safer Way merged with a competitor to become Whole Foods, one of the country's first natural foods supermarkets. Thirty years and 15 acquisitions later, Whole Foods dominates natural foods retailing and has become an iconic brand in the United States. It is expanding in the United Kingdom as well. Its purchasing standards and priorities shape agricultural practices around the world. The outspoken Mackey, who is a self-styled guru on conscious capitalism, was interviewed by Harvard Business Review:
What is conscious capitalism?
First, you have to understand the basic principles that help capitalism flourish. One is property rights. You need the ability to trade your property, and to trade it to pretty much whoever you want. Another is the rule of law-laws and regulations that are well understood so that you can factor them into your business decisions. The rule of law has to be applied equally to everyone. For example, if Whole Foods goes into a city and is told our cheese has to be refrigerated, it's fundamentally unjust if that rule isn't applied to our competitors as well-which, I might add, does sometimes happen in New York City. You also need to have conscious businesses-that is, businesses that become conscious of their higher purpose, which is not just about maximizing profits and shareholder value.
Second, you have to recognize the stakeholder model: Customers, employees, investors, suppliers, larger communities, and the environment are all interdependent. You operate the business in such a way that it's not a zero-sum game.
Third, you need what we call conscious leadership. You could also call it servant leadership. Leaders identify their own flourishing with the flourishing of the organization. They're trying to serve the organization and its purpose.
Fourth, you have to create a conscious culture-a culture that allows the organization to fulfill its higher purpose, implements the stakeholder model, and enables conscious leadership to flourish.
So, what are the core principles of Whole Foods, and where do they come from?
I think business enterprises are like any other communities. They can aspire to the highest values that have inspired humans throughout time. You can use different value models, but I like Plato's the good, the true, and the beautiful. Add the heroic to that-meaning changing and improving the world and standing up for what you believe is true and right and good. I think Whole Foods's highest purpose is a heroic one: to try to change and improve our world. That is what animates me personally. That is what animates the company. I resisted that purpose for a long time, by the way. I actually thought we were in some variant of service- that was really about fulfilling the good. The team members consistently told me I was wrong, that we had a different purpose. It was this more heroic purpose.
In terms of the age-old debate about whether companies exist for the shareholders or for something else, is there one group? Is it customers? Is it employees? Or is it purpose?
That gets back to the second principle of conscious capitalism-the stakeholder model. I think it's deep in human nature to think in terms of the zero sum. If one stakeholder is winning, someone else must be losing. It comes from sports, where there is one winner and lots of losers, and this idea of a fixed pie, where if someone is getting a bigger share, someone else has to be getting a smaller piece, and what's needed for social justice is to make sure people get equal pieces. But a conscious business recognizes that you can have an expanding pie, and potentially everyone can get a larger piece.
I'll give you a simple example: management'sjob atWhole Foods is to make sure that we hire good people, that they are well trained, and that they flourish in the workplace, because we found that when people are really happy in their jobs, they provide much higher degrees of service to the customers. Happy team members result in happy customers. Happy customers do more business with you. They become advocates for your enterprise, which results in happy investors.
That is a win, win, win, win strategy. You can expand it to include your suppliers and the communities where you do business, which are tied in to this prosperity circle. A metaphor I like is the spiral, which tends to move upward but doesn't move in a straight line.
HBR's pages are full of discussions about how sustainability is becoming a competitive advantage. Do you believe that ?
I do think sustainability is a way to compete. I don't think it's the most important way. I see it as more of a niche. It reflects the consciousness of your customers, and the truth is that most customers don't care about it. Most customers at the end of the day care mostly about price. That consciousness is still dominant out there. But there is a growing consciousness about things like environmental sustainability and animal welfare. When we started out, 30 years ago, organic was a niche, and most people didn't know what it was. But I would say that partly because of Whole Foods' success, organic is now very much in the national consciousness.
More recently, Whole Foods has gotten behind the emphasis on local agriculture and has helped to popularize it. Wal-Mart is beginning to pay attention to this also, so in a lot of ways Whole Foods is helping to evolve the agricultural system in the United States.
Source: Excerpts from J. Mackey, 2011, What is it that only I can do? Harvard Business Review , January: 119-123.
Why does Mackey acknowledge that most customers don't care about consciousness, and yet he and his firm emphasize so much of it?

Question 8

ON ETHICS: As CEO of a leading bank in Wall Street or the City of London, you have decided to directly meet participants in the Occupy Wall Street movement or the Occupy London movement, respectively. What will you say?

Question 9

ON ETHICS: Hypothetically, your MNE is the largest foreign investor in (1) Vietnam where religious leaders are being prosecuted or (2) Estonia where ethnic Russian citizens are being discriminated against by law. As the country manager there, you are being pressured by NGOs of all stripes to help the oppressed groups in these countries. But you also understand that the host government could be upset if your firm is found to engage in local political activities deemed inappropriate. These activities, which you personally find distasteful, are not directly related to your operations. How would you proceed?