27 September 2010

Friedman - yes, he was right

Milton Friedman said it best, and is often quoted - "The business of business is business". He also said "there is one and only one social responsibility of business–to use it resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud".

It is these quotes and others from Friedman, that are frequently used to justify a position that CSR and Sustainability are not the responsibility of business, and that business has no role to play in the sustainability argument. A derivative is that the only issue of sustainability that should be of interest to a company is the sustainability of the company.

In a way both of these positions are accurate, and both arguments support the active engagement of business in CSR and Sustainability as more widely defined.

Certainly business can and should look to government for regulation, and should seek to influence government to avoid the introduction or support the repeal of harmful regulation.

Likewise businesses should recognize and accept the prerogative of governments, as representatives of the people, to develop regulation. In carrying out this role, government is simply fulfilling its responsibility, and business then as the obligation to implementation and comply with such regulation. In one very real example - Climate Change is real. the arguments are done. Now governments are setting objectives and agendas. It is time for business to stop pretending and get on with preparing, and indeed leading to achieve the changes that will be required.

At the same time there is no reason that a business should not, in the interests of fulfilling the spirit of Milton Friedman's quote, implement CSR and Sustainability programs, especially where such programs will enable the accomplishment of the business plan and objectives. For example, very specifically "social programs" such as assisting local communities with the establishment of basic education or clean water resources can be a manifestation of a company's desire to keep a local workforce supportive of the company, and in so doing ensure a long term source of appropriate labor, and reduction in the risk of local of national government intervention in company activities. In such a way a "social program" can serve as a cost effective method of supporting the core business of the company.

Taking the same example a step further, it is probably significantly harder to suggest that programs in areas either not serviced by the company, or outside the company's labor or raw material catchments, are justifiable as anything other than public relations exercises (which, it should be noted, are equally valid and appropriate business activities).

Another legitimate reason to implement a CSR program might be to thwart a government's desire to create a specific law. If there is the danger of the introduction of a law that the company (or industry group) perceives as being too restrictive, and the company believes that their actions could forestall the introduction of that law, a company may decide to introduce its own very visible program, therefore undercutting the 'need' for the law. This in no small part explains the tobacco industry’s involvement with the corporate responsibility movements, and it’s participation in CSR events (although sometimes in a side room).

For all that has been said in support of CSR and Sustainability activities above, no business should be initiating such activities, projects or reporting simply to create a "warm and fuzzy" feeling. That is not good business, and does not represent the interests of shareholders, and is a failure of management to uphold their fiduciary responsibility.

So in a funny way, Milton Frieidman was right - AND Corporate Social Responsibility and Sustainability ARE issues for business. The business that ignores CSR and Sustainability risks endangering its license to operate, risks increased costs, risks customer defection, and faces a grim future of watching its competition move steadily forward while it whithers away while proudly upholds a principle ("the business of business is business").

17 September 2010

SEC and the EOL data; a really smart move

So the SEC buys access to EDGAROnline's database. My initial reaction was "What, the SEC is buying their own data from a vendor". I talked this through with someone, whose take was completely different. He pointed out that EOL has already tagged over 10 years of all public company data in the US, both annual and quarterly data. He also pointed out that multi-year analytics will require multi-year data streams. Finally - because I was being a bit thick, he gently reminded me that the current stream of XBRL data is only one year old, maybe two to the largest filers. Multi-year analysis, and with that the ability to gain the data analysis advantages that XBRL delivers, is simply not possible without years of data.

Who has that data? EOL.

It seems a very smart move on the part of the SEC. Coupled with the i-Metrix tools, they will be able to download that data in a format that is well understood by almost all analysts: Excel.

The difficulty may come in mapping from the historical tagging that was performed by EOL to the actual tagging performed by the reporting company. But I expect that will be a much "easier" problem to solve than attempting to perform the historical tagging for themselves.

Frankly, it sounds like a great investment by the SEC.

(Disclosure: I am completely independent of EOL) 

15 September 2010

The SEC gains an(other) XBRL advocate

Yesterday it was announced that Mike Starr is joining the SEC as Deputy Chief Accountant for Policy Support and Market Monitoring. The press release lists some of Mike's achievements and past activities. What it does not say is that Mike is a very strong advocate for XBRL, and has been a keep supporter for XBRL for almost a decade.

Mike Starr served until the end of last year as a member of the Board of XBRL US Inc, and has strong connections in the XBRL community. He understands the vision of XBRL as a standard that can create significant efficiencies throughout the business reporting supply chain.

Congratulations to Mike Starr, and to the SEC. 

10 September 2010

CSR/Sustainability reporting: the coming explosion

The next three years will see CSR/Sustainability reporting transition from a "nice to have" to a "Cost of Entry". Companies will find themselves less able to win contracts, upstream supply chain participants will expect reports, and banks will demand to see the CSR report just as they require a set of (audited) financial statements (I'll talk about "audited" in another post).

Today the creation and maintenance of a CSR report can be expensive and time-consuming, and there doesn't seem to be the demand.

Cast your mind back to the darkest reaches of history - say - 1995. The Internet was reasonably well established, and you could search for sites, sort of. If you knew the website of a company (or someone's e-mail address, not everyone had one) you could type in the www then the e-mail address after the @ but before the ".com", and if you were lucky, or the company was really really big, you could find a website.

Companies around the world knew that being on the web mattered, and certainly the leaders had some pretty fantastic sites.

A century or two later, sometime around 1998, I don't remember when exactly, I did the little dance of the cut-and-paste to search for a company website... and for this search, there was no site. I rang my contact at the company and asked "I'm surprised your company doesn't have a website. Why not?"

The answer I got was "Creating and maintaining a website is expensive and time-consuming, and there doesn't seem to be the demand." Sound familiar?

So what changed to make websites truly ubiquitous?

The cost of creation plummeted, tools became available to help build sites, large numbers of people played with HTML and other web technologies. But most important, people; me, and you, began to expect to find a website. Companies without websites dropped in our estimation as "serious" companies. 

Did the websites need to be sexy, smart, absolutely current as of this morning? No. But there had better be a site.

The coming explosion

CSR/Sustainability reporting is at that cusp. the big companies, regardless of industry, have CSR reports. Thousands of companies provide reports to the CDP (Carbon Disclosure Project), over a thousand are producing GRI (Global Reporting Initiative) compliant reports and/or GRI Content Indexes. Today I go to websites and wonder if I do not see Corporate Responsibility, or CSR, or Sustainability. I'm reaching the point where I wonder what they are hiding.

And I ask "I'm surprised you don't have a sustainability policy or a CSR report. Why not?" Well, you know the answer that I'm getting.

But that is about to change, and change pretty radically. Demand creates innovation. Innovation drives adoption. Adoption feeds innovation and demand.

I am confident that there will soon be tools and processes that will make the creation of CSR reports "easy", inexpensive, and ubiquitous. And when that happens, centuries will have passed in an instant, and we will be living in a world in which CSR/Sustainability reporting is simply assumed. That regardless of the size of the company, if it is a "serious" company, wanting to attract and retain clients, staff, and frankly needing to demonstrate that it understands the importance of the societal/corporate "contract", CSR/Sustainability reporting will be a core element of communications and corporate reporting. Just like a website for (audited) financial statements are today.

04 September 2010

Earthquake in Christchurch, NZ

Christchurch, New Zealand suffered a 7.1 earthquake yesterday. It appears, remarkably, there there have been injuries but no fatalities. Christchurch is a lovely city on the Canterbury Plains next to the Pacific Ocean. I have found memories of many visits to the city, and have close friends living there. We have been in contact and other than bad damage to their house and the neighbours, all are safe and uninjured.

GNS Science, a New Zealand government-owned research organisation released the following Media Release.

As background, the Hawke's Bay earthquake of 1931 killed hundreds, and raise the port of Napier far enough that the port was too shallow for ships and it silted over. There is now an airfield over what was a port. In addition, the rebuilding that took place in Napier after that quake followed the style of the day, making Napier a center of Art Deco buildings.

Christchurch will recover (quickly), and will continue to be a beautiful city on the plains of the South Island.

At the same time, this is a reminder to all New Zealanders of the importance of earthquake preparedness. Especially in Wellington!





The magnitude 7.1 earthquake that hit Canterbury early today is expected  to be the most damaging since the 1931 magnitude 7.8 Hawke's Bay  earthquake.

The earthquake, which jolted Cantabrians awake at 4.35am on Saturday, was  located 30km west of Christchurch near Darfield at a depth of 10km. It was  felt throughout the South Island and as far north as New Plymouth. Damage  to buildings and infrastructure in Christchurch and surrounding areas is  considerable.

Dozens of aftershocks occurred in the first few hours after the quake and  it is likely they will continue for weeks.   GNS Science duty seismologist, John Ristau, said typically the largest  aftershocks occurred within the first 48 hours of a large earthquake. They  generally declined in frequency and size over time.

"A rule of thumb for a large earthquake at a shallow depth such as this is  that the largest aftershock will be about one unit of magnitude lower than  the main shock," Dr Ristau said.   Seismologists say a foreshock of about magnitude 5.4 occurred a few  seconds before the main shock. Both shocks occurred in slightly different  locations. Seismic energy from the two shocks became entangled making it  difficult to pinpoint the size, location, and depth of the main shock.   There are several known active faults under the Canterbury Plains and in  the Canterbury foothills, but at this stage it appears the earthquake has  not occurred on a known fault.   Scientists from GNS Science, Victoria University of Wellington and  Stanford University in the US have joined colleagues from Canterbury  University to deploy about 40 portable earthquake instruments to record  aftershocks over the next few weeks.

The GNS Science contingent hopes to have most of their portable  instruments deployed around Canterbury by Sunday night. This will mean  approaching landowners and seeking permission, as they hope to place some  of the instruments on private land.   They will concentrate their deployment on the areas where most of the  aftershocks have already occurred.

 The battery-powered instruments will be left unattended for about three  weeks to record aftershocks. Seismologists study aftershock sequences to  find out more about the mechanics of the main shock and rupture, and to  ascertain if stress in the earth's crust has been transferred onto other  faults in the region.

Scientists will also study satellite data to investigate surface  deformation in Canterbury as a result of the earthquake. Geologists from  GNS Science have travelled to Canterbury to investigate the geological and  environmental impacts of the quake, and to undertake a detailed ground  study.   Engineering seismologists from GNS Science will join colleagues from the  Building Research Association of NZ and Canterbury and Auckland  Universities to investigate the impacts on buildings and infrastructure in  Canterbury to find out how different construction types performed.

The information they gather will be fed into the engineering community to  help ensure structures are built appropriately to cope with stresses  caused by strong ground shaking. It will also help as older buildings and  structures are retro-fitted to improve their ability to withstand  earthquake shaking.

Much of the scientific response to the earthquake is being coordinated  under the GNS Science-led Natural Hazards Research Platform, set up by the  government a year ago to provide long-term funding for natural hazards  research.   Manager of the Platform, Kelvin Berryman, said post-earthquake  reconnaissance was one of the roles of the Platform, as well as developing  quantitative estimates of earthquake, volcano, landslide, tsunami, flood,  snow, and wind hazards in New Zealand.

"We have an obligation to learn as much as we can from this event to help  improve our understanding of earthquakes and their impact on society, and  to help ensure that New Zealand is well prepared for future earthquakes,"  Dr Berryman said.   To see more information on the earthquake go to our GeoNet site.

http://www.geonet.org.nz/ Specific information on the Darfield quake can be found here.