TRIPLE BOTTOM LINE, ETHICAL

CONSUMERISM & ETHICAL SUPPLY

CHAIN MANAGEMENT

Governance and Ethics in a

Stakeholder Economy
 SESSION 11 - ISSUES
• Triple Bottom Line
• ‘Ben & Jerry
• Ethical Consumerism
• Sustainability Certification
• ‘Consumer Sovereignty’
• One for One’ Business Model and TOMS
• ‘Purpose over Product’ –The case of Benetton
• Ethical Supply Chain Management
 TRIPLE BOTTOM LINE
• Companies should prepare three different bottom lines
(profit and loss, ‘people’s account’, ‘planet account’)

• Balances Score Card approach: what you measure is

what you get; only measurement of social and
environmental impact will succeed in developing
social and environmental responsibility

“As we move into the third millennium, we are

embarking on a global cultural revolution.
Business, much more than governments or non-
governmental organizations (NGOs), will be in the
driving seat.”
John Elkington
BEN AND JERRY’S
How to open a socially responsible business…

https://www.youtube.
com/watch?v=JoXjV
BRXxJI&t=685s
• Operates 3 Mission Statements – product, economic and social –
and describes itself as being ‘values-led’

• ‘Caring Capitalism’

• Ben and Jerry’s Foundation – donation of 7.5% of the company’s

annual pre-tax profits

• ‘Peace Pop’ – 1% of profits to raise peace awareness

• Proceeds from the sale of ‘Rainforest Crunch Ice Cream’ reinvested

into rainforest preservation

• ‘Eco-Pint’ container – unbleached paper board container

• Sponsoring for the Rosebud Sioux Tribe Wind Turbine Project

• Salary caps for executive remuneration

• 3 pints of ice cream per week for employees, free gym

membership and use of company child care centre

• ‘One World One Heart Festival

• Campaign against bovine growth hormone

• ‘Giraffe Project’ – to award people who stick their necks out

and stand up for what they believe with B&J scoop shops
nominating people for the award

• Social and Environmental Audits (liveable wage policy,

employee health and wellness, time devoted to community
service, water usage, discharge of waste water
The Two-Part Bottom Line

https://www.yout
ube.com/watch?
v=JoXjVBRXxJI&t=
685s
 The New Era - Unilever
• Socially Responsible Organizational Identity is a
valuable, rare and tacit resource (Barney, 1986;
1991) and multinationals strategically keen to
capture such an asset through M&A

• Risk, however, of comprised integrity after a

corporate takeover

• Unilever takes majority share in Ben and Jerry’s for

$326 million in 2000
 The New Era - Unilever
Initially
• Closing of production plant and a distribution centre, workers at the two sites
were laid off, and sales representatives at headquarters were fired.

• Unilever prevented employees from emblazoning the Ben & Jerry’s logo on a
bus driving them to a protest.
Later
• Since the acquisition, Unilever has nearly tripled Ben & Jerry’s revenue and
added hundreds of jobs

• Unilever established an “external board” charged with overseeing Ben &

Jerry’s culture and social mission

• According to the legally binding merger agreement, the board does not
report to any authority other than itself, nominates its own members, has the
right to sue Unilever and will exist in perpetuity
 The New Era - Unilever
• The company now offers its lowest-paid workers more than
twice the national minimum wage

• Use of only cage-free eggs.

• Became B Corporation, a voluntary certification by a non-

profit group called B Lab designating companies that uphold
high social and environmental standards.

• The company supports marriage equality and campaign

finance reform

• Introduced a flavour, ‘Save our Swirled’ intended to raise

awareness about climate change.
Sustainability and CSR at Ben and Jerry’s

https://www.youtube.c
om/watch?v=N_x3b0HB
wRA
Ethical Consumerism
‘Consumer Sovereignty’ being exercised through
Consumer Boycotts

• South Africa’s Apartheid system (e.g. Barclays Bank)

• Consumer boycott key to unionisation in the United States

• Gandhi’s boycott of British salt and cloth as part of his non-violent resistance

• Rosa Parks’ refusal to give up her seat triggered a consumer boycott that
almost bankrupted the bus company

• Shell and the Brent Spar incident

• Shell and the execution of Ken Saro Wiwa

• Boycott of Danish dairy company Arla over Mohammed caricatures

 Divestment – The Case of South Africa
• In 10 years, more than $350 million in investments were
withdrawn

• Barclays Bank sold its 40% share of Barclays National Bank to

South African mining and industrial conglomerate Anglo
American Corp. as well as two associated companies for $265
million in 1986

• Barclays Managing Director Chris Ball admitted at the time

that "political factors," including anti-apartheid protests in
Britain and the new American economic sanctions on South
Africa, "have precipitated this transaction."
 Divestment – The Case of South Africa
• Barclays Chairman Timothy Bevan: "Our decision was a
commercial one," he said, "but it was based on the
political and moral situation. All three are part of a circle.“

• Undermined business confidence in South Africa’s future

• 12,000 bank accounts were closed by UK students in 2

years

• Barclays accepted payment in ‘financial rands’ which

were worth less than half the value of ‘commercial rands’
but were the only way that capital may be withdrawn
from the country.
What is an ethical consumer?

What do you understand

ethical behaviour to be?
• Being an ethical consumer means buying
products which were ethically produced
and/or which are not harmful to the
environment and society.

• Examples of products in this category

include, among others, organic produce,
fair trade goods, energy-efficient light
bulbs, electricity from renewable energy
and recycled paper
Craig Smith in his book Morality and the Market: Consumer
Pressure for Corporate Accountability described the
phenomenon of ‘ethical purchase behaviour’ describing it
as a form of social control of business, with consumers
casting “purchase votes on social responsibility issues”.

‘Ethical purchase behaviour’ or ‘ethical consumerism’

works on the assumption that consumers care about issues
of corporate responsibility and that this will influence their
purchase and consumption behaviours providing an
incentive structure for companies to be socially and
environmentally responsible.
However, research suggests that “there is a
major gap between what consumers say
they would do and their actual behaviour.”
(Vogel, 2005)

Social Desirability Bias

Consumers insist when being asked that they

are doing “the right thing” but their
“revealed preferences” suggest they are
more self-interested when it comes to
purchase and consumption behaviours
Would you describe yourself as being self-
interested as a consumer?

Do you also suffer from social desirability bias?

‘Buy Local’– a form of ethical
consumerism?

• Benefit local communities

• Create local jobs through increased local demand

• Instil a sense of pride in local artisans and producers

• Create sustainable solutions through local consumer

pressure

• Cut carbon emissions through reduced transport of

imported goods
‘Buy Local’

• Who consciously purchases locally produced

items? And why?

• Does Guyana have a ‘Made in Guyana’

label?

• Is the local aspect more important than the

quality aspect or the price? Should it be?
Certified Guidance for the Ethical Consumer

• B Corporation

• Rainforest Alliance
https://www.bcorporation.net/what-are-b-corps
 B Corporation
• Certification to document a company’s adherence
to standards of social and environmental
performance and assures a high degree of public
accountability and legal transparency

• More than 2100 certified companies from more than

50 countries

• Recertification required every two years

Let’s hear from them:

https://www.bcorporation.net/what-are-b-corps
 B Corporation
How to become certified:
• Take the Stakeholder Impact Assessment (varies
depending on company size) – Standards are developed
by the Standards Advisory Council and Regional Advisory
Groups)

• Meet the legal requirement (to expand the responsibilities

of the company to take into consideration the interests of
all stakeholders and not only shareholders (possible
amendments to the corporate governance documents)

• Sign Declaration of Interdependence and Terms

How B Corporation classifies companies:
•Ordinary Businesses – Whose primary objective in business is to generate
high financial returns. They may be interested in the possibility of using their
business to serve a higher purpose, but are not actively pursuing this
objective.

•Sustainable Businesses – Primary objective: pursue positive impact and

generate returns. They may be actively pursuing their impact objectives, but
may or may not have taken the steps to measure and evaluate how their
business impact society and the environment.

•B Corporations – Businesses that are primarily trying to solve a social or

environmental issue through their enterprise. They also expand their
corporate duties to include the consideration of the interests of all
stakeholders, not just shareholders. B Corps are focused on improving and
sustaining their impact over time and generating profit simultaneously.
 Who are they?
• Network of farmers, foresters, communities,
scientists, governments, environmentalists, and
businesses dedicated to conserving biodiversity
and ensuring sustainable livelihoods

• Recent merger with UTZ, a Dutch label for

sustainable farming

• RFA-certified authorization bodies audit farms

and those farms that meet the requirements
can promote and market their produce using
the RFA seal
Rainforest Alliance Certification (Agricultural Standard)
•Less water pollution, as all sources of contamination (pesticides, fertilizers, sediment, wastewaters,
garbage, fuels and so on) are controlled.

•Less soil erosion, implementation of soil conservation practices

•Reduced threats to the environment and human health: Prohibition of most dangerous pesticides and all
agrochemical use is strictly regulated, farmers must use mechanical and biological pest controls where
possible

•Wildlife habitat is protected, as deforestation is stopped, the banks of rivers are protected by buffer zones,
critical ecosystems such as wetlands are protected and forest patches on farms are preserved.

•Less waste, as farm by-products such as banana stems, coffee pulp, orange peels and un-marketable
foliage are composted and returned to the fields as natural fertilizer. Other wastes, such as plastics, glass and
metals are recycled whenever possible.

•Less water used, application of water conservation measures in washing and packing stations, housing
areas and irrigation systems.

•Improved conditions for farm workers, who get fair wages, decent housing, clean drinking water, sanitary
facilities and a safe and wholesome work area. Workers and their families also have access to schools, health
care, transportation and training.
‘Incorporate Giving into your Business’ - TOMS
Founded by: Blake Mycoskie in 2006

Based in: Playa del Rey, California

Staff: 550 employees

Business Model: ‘One for One’ (shoes, eyewear, coffee)

Corporate History: Bain Capital acquired 50% of the company

which was valued at $625 million

Charitable Achievement: Social Since 2006, Toms has given

away more than 35 million pairs of shoes in 60 countries.
 TOMS Social Entrepreneurship Fund
1. The Kairos Society
• Membership-based network of innovative designers, engineers, scientists, and business
students from around the world that helps focusing them on solving real problems through
entrepreneurship.

2. ArtLifting
• Empowers artists living with homelessness or disabilities through the celebration and sale of
their artwork.

• Helps artists to secure their own income through the sale of original paintings, prints, and
products. By showcasing and selling artwork via ArtLifting.com; Every artist earns 55% from
the profit of each sale

3. Owlet
• Smart Sock – the sock tracks babies’ heart rate and oxygen levels while they sleep, pulse
oximetry measures heart rate and oxygen levels; Hypoallergenic and made from 100%
organic cotton; Includes 3 interchangeable sock sizes to grow with baby

4. Ava for
• App for captioning conversations with deaf and hard-of-hearing people
Criteria for Equity Investment

•An innovative business model that creates meaningful change.

•Be a for-profit business.

•Have a direct social mission (at scale, make the world a better place).

•Has launched, or is preparing to launch within the next 90 days.

•Have a product or service with a clear revenue stream(s) with paying customers.

•If you’re making a technical product, your team has the necessary skills to develop and manufacture the
product without outside expertise.

•Have an Investment Presentation or Business Plan (minimum 15 slides/pages) that describes the
problem your company is solving; the market opportunity; the background qualifications of your team;
and the financial terms of the investment opportunity.

•A minimum of $100,000 of commitments from other Accredited Investors, Venture Capital Fund(s), or a
Startup Accelerator.
https://www.youtu
be.com/watch?v=
C3eCo-El_RY
 Criticism
• Undermining local economic development

• Short-term fix in a system needing long-term health, sanitation and

education solutions

• TOMS wasn’t addressing the reason for why kids were running without
shoes in the first place

• “It promotes a view of the world's poor as helpless, ineffective people

passively waiting for trinkets from shoe-buying Americans.”

• “Poor people aren’t poor because they lack stuff; they’re poor because
they lack the infrastructure to create wealth.” (Michael Miller, PovertyCure)

• “How do people create prosperity for their families, and then, how can I
assist with that?”
 Addressing the Criticism
• Instead of canvas loafer TOMS gives sports shoes.

• In response to the appropriateness of their shoes in different contexts, in

Mongolia TOMS now give away snow boots.

• In response to the dependency issue, TOMS now wants to pursue giving the
shoes to kids as rewards for school attendance and performance.

• Providing ‘birth kit’ which includes a clean pad, gloves and sterile
equipment to cut the baby’s umbilical cord) with the sale of every bag.

• With every bag of coffee the company sells, it gives a week’s worth of
clean water for every pound of coffee sold money to help provide clean
water

• Sourcing shoes from local producers e.g. in Haiti

 Other One-for-One Companies

• Warby Parker sells and distributes eyeglasses

• Smiles Squared sells and gives away tooth brushes

• Roma Boots sells and gives away boots

• Nouri Bar donates a meal for a hungry child for every nutritional bar it
sells

• Sir Richard’s sells and donates condoms

• KNO Clothing gives away clothes and donates to homeless shelters

• Soapbox Soaps donates a month of water, a bar of soap, or a year of

vitamins for each soap product it sells, and so on.
 Questions
• One-for-One Model – Marketing
Gimmick or Meaningful Social
Contribution?

• In the Caribbean, how could a ‘one-for-

one’ business model look like? What
kind of social or environmental
problems should it tackle and how?
 ‘TOMS’ AS AN EXAMPLE FOR THE…..

• Emergence of an ‘emotion’ economy

• Shift from product characteristics to emotional
experiences as a factor influencing purchasing
decisions

Bert van de Ven ‘Ethical Framework for the Marketing of CSR’

Justified?
Research on link between consumer attitudes and CSR

• Murray and Vogel (1997): Managers are more willing to

consume from a company after exposure to information
about its CSR
• Ellen, Mohr and Webb (2000): Consumer reaction to cause-
related marketing varies with type of cause and retailer’s role
• Creyer and Ross (1997): Shows positive relationships between
consumer’s preference for a company’s products and the
extent to which their perceptions of that company’s ethics
exceeds their expectations
• Brown and Dacin (1997): Focus on the effects of a company’s
CSR record on consumer evaluations of its products
Important conditions for a positive effect of CSR on
consumer attitudes: (Ven)

1. Strong reputation of the company

2. High company to issue cause fit
3. Personal fit with the good cause of the company
4. Consumers pay premium prices when they
themselves have a strong commitment to the cause
 First step in developing the right approach
towards the marketing of CSR is an assessment
of the ideal and actual identities.

Choice of one of the following strategies:

1. Reputation management
2. Building a virtuous brand
3. Ethical product differentiation
 Ethical Marketing ‘Italian Style - Focus on
Purpose over Product?

• All the conflicts are based on taboos and on a difference that

separates rather than unites. The Benetton’s plan was to
integrate opposites and to unite differences under a single flag –
the Benetton’s logo

• Depiction of human suffering, prejudice, ignorance and sexuality

• Use of social issue-themed pictures to - promote the brand?

David Kirby's parents said: “We
don’t feel we’ve been used by
Benetton, but rather the reverse:
David is speaking much louder
now that he’s dead, than he did
when he was alive''
“Benetton’s communications strategy was born of the company’s wish to produce
images of global concern to global customers. We realized some time ago that
we had a unique tool for communicating worldwide and that it would be cynical to
waste it on self-serving product promotion. Benetton believes that it is important
for companies to take a stance in the real world instead of using their advertising
budget to perpetuate the myth that they can make consumers happy through the
mere purchase of their product. Our images do not show you a fictitious reality in
which you will be irresistible if you make use of our product. They do not tell
anyone to buy our clothes, they do not even imply it. All they attempt to do is to
promote a discussion about issues we feel should be more widely discussed. We
are aware of the controversy some of our images have caused but we believe
that all worthwhile stances will have supporters and detractors. Our hope is that
people will move from the sterile discussion of whether or not a company is
entitled to illustrate its point of view in its advertising campaigns to a discussion
of the issues themselves.”
 Let’s discuss…
• Revolutionary and Path-Breaking or Unethical
and Offensive?

• Would Benetton’s approach attract your

attention and prompt you to buy or put you
off?

• What would the effect of a Benetton-style

marketing campaign be in the Caribbean?
How would people react? Why would they
react in that way?
Ethical Supply Chain Management
 Supply Chain and its Management

Definition

A supply chain, as opposed to supply chain management, is a

set of organizations directly linked by one or more upstream and
downstream flows of products, services, finances, or information
from a source to a customer.

Supply chain management is the management of such a chain.

Mentzer, J.T. et. al. (2001), ‘Defining Supply Chain Management, in: Journal of Business Logistics, Vol. 22 , No. 2,
2001, pp. 1–25
 Ethical Sourcing Initiatives
• Avoiding risks to corporate reputation

• Manage supply network sustainability issues

Reputation: “Evaluation of a firm by its

stakeholders in terms of their affect, esteem
and knowledge” (Deephouse 2002)

Means to create a strategic advantage (Fombrun)

Issues in Ethical Supply Chain Management
1. Child Labour

2. Discrimination

3. Freedom of Association (Collective Bargaining)

4. Health and Safety

5. Fair Compensation

6. Consumer Rights

7. Environmental Impact
Outsourcing Extends liability and causes
a significant shift of risks off
site

Business risks become procurement

risks

Examples
1. Branded Clothing and footwear
2. Forest Products
3. Branded Confectionary
 Action 1
Dumping of toxic waste

Action 2
Company A Extracting water from aquifer
for factory supply

Action 3
Buying wood pulp from
Distributor B
sources pulp from

Exporter C Exporter D

buy pulp
Company F Company H

!
Illegal logging
contributing to
deforestation
and social
Company E Company G decay

De Pedro, Rimbau-Gilabert ‘Stakeholder Approach’

 ESCM AS A TOOL FOR RISK MITIGATION
Companies can take the following steps: Empowered lives.
Resilient nations.

1. Integrating compliance and ethics as a key factor in supplier selection

and evaluation

2. Targeting suppliers by commercial importance and ethical risk

3. Recording compliance histories of important suppliers

4. Assigning compliance personnel to important supplier relationships

5. Conducting regular assessments of supplier risk profiles

Empowered lives.
Resilient nations.
 BANGLADESH CLOTHING FACTORY DISASTER

• Collapse of the Rana Plaza building in Dhaka on April

Empowered lives.
Resilient nations.

24, 2013

• Fatalities: 1,127

• As a result, 123 investors representing more than

US$1.2 trillion in assets started calling for a system
reform of health and safety regimes and the adoption
of ‘zero tolerance policies’
EXAMPLE: MARKS AND SPENCER
Empowered lives.
Resilient nations.

Global Sourcing Principles

Ethical Trading Initiative ‘Base Code’

 MARKS AND SPENCER - GLOBAL SOURCING PRINCIPLES

Workforce Rights
Empowered lives.

The people working for our suppliers are to be treated with respect, and their
Resilient nations.

health, safety and basic human rights must be protected and promoted. Each
supplier must strive to comply with the ETI base code and with all relevant local
and national laws and regulations, particularly with regard to:

• Minimum age of employment

• Freely chosen employment
• Health and Safety
• Freedom of association and the right to collective bargaining
• No discrimination
• Working hours
• Rates of pay
• Terms of Employment
MARKS AND SPENCER - GLOBAL SOURCING PRINCIPLES

Production Sites and Labelling Empowered lives.

Resilient nations.

Suppliers must agree with us in advance the production site or sites to be used for
each order; no subcontracting of our orders from these agreed locations is allowed

Regular Assessment
All production sites are visited and assessed regularly by our suppliers and by our own
people.

Environmental Responsibility
At the very least, suppliers must meet all local and national regulations.

Commitment to extending these principles throughout the

supply chain
We expect our suppliers to adopt similar principles in dealing with their own suppliers
 MARKS AND SPENCER - GLOBAL SOURCING PRINCIPLES

“Suppliers must apply these principles at all times,

and must also be able to demonstrate that they are
doing so. We will work with suppliers to support any
necessary improvements but we will also take
action, which may involve cancelling contracts
and ceasing to trade, if suppliers are not prepared
to make appropriate changes.”
 MARKS AND SPENCER – ETI BASE CODE
1. Employment is freely chosen

2. Freedom of Association and the Right to Collective Bargaining respected

Empowered lives.
Resilient nations.

3. Working Conditions are safe and hygienic

4. Child Labour shall not be used

5. Living wages are paid

6. Working hours are not excessive

7. No discrimination is practised

8. Regular employment is provided

9. No harsh or inhumane treatment is allowed

 Empowered lives.
Resilient nations.

WHICH INTERNATIONAL
FRAMEWORKS DEAL
WITH ESCM?
 Governance Frameworks for ESC
Empowered lives.
Resilient nations.

UN GUIDING PRINCIPLES ON BUSINESS AND

HUMAN RIGHTS (‘RUGGIE PRINCIPLES’)

‘PROTECT, RESPECT AND REMEDY’

 ‘PROTECT, RESPECT AND REMEDY’ - THE
CHALLENGE
Empowered lives.
Resilient nations.

“The root cause of the business and human rights predicament

today lies in the governance gaps created by globalization –
between the scope and impact of economic forces and actors and
the capacity of societies to manage their adverse consequences.

These governance gaps provide the permissive environment for

wrongful acts by companies of all kinds without adequate
sanctioning or reparation. How to narrow and ultimately bridge the
gaps in relation to human rights is our fundamental challenge.”
 ‘PROTECT, RESPECT AND REMEDY’ - 3 PRINCIPLES

PROTECT
The State’s duty to protect:
• legal dimension (international law) Empowered lives.

• policy dimension (policies to prevent, investigate and punish the abuse and provide access to
Resilient nations.

redress)
•Corporate Culture, Reporting

RESPECT
Companies duty to respect as reflected in:
• Tripartite Declaration of Principles concerning Multinational Enterprises an d Social Policy
• OECD Guidelines for Multinational Enterprises
• Global Compact
• International Chamber of Commerce
• broader scope defined by social expectation - the ‘social licence to operate’

REMEDY
• Access to judicial systems
• Development of non-judicial systems
 Empowered lives.
Resilient nations.

GLOBAL COMPACT

ILO DECENT WORK AGENDA

Human Rights
Principle 1: Businesses should support and respect the protection of internationally
proclaimed human rights; and
Principle 2: make sure that they are not complicit in human rights abuses.

Global Compact
Labour Empowered lives.
Resilient nations.
Principle 3: Businesses should uphold the freedom of association and the effective
recognition of the right to collective bargaining;
Principle 4: the elimination of all forms of forced and compulsory labour;
Principle 5: the effective abolition of child labour; and
Principle 6: the elimination of discrimination in respect of employment and occupation.

Environment
Principle 7: Businesses should support a precautionary approach to environmental
challenges;
Principle 8: undertake initiatives to promote greater environmental responsibility; and
Principle 9: encourage the development and diffusion of environmentally friendly
technologies.

Anti-Corruption
Principle 10: Businesses should work against corruption in all its forms, including
extortion and bribery.
 ILO DECENT WORK AGENDA
• Work and Wages Empowered lives.

•
Resilient nations.
Annual Leave and Working on weekly and Public Holidays
• Employment Security
• Family Responsibilities
• Maternity at Work
• Health and Safety at Work
• Work and Sickness
• Social Security
• Fair Treatment at Work
• Children at Work
• Forced Labour
• Trade Union Rights
 QUESTIONS FOR DISCUSSION
1. What do you make of the argument that different countries,
Empowered lives.
Resilient nations.
societies and markets have different standards and cultural norms
and therefore shouldn’t be judged by an exclusively ‘Western’
viewpoint.

2. Child labour in some developing countries is an important source

for household incomes. Why should companies discourage the
practice?

2. Being often the largest employer in Caribbean countries, does the

state have a role to play in promoting ESCM through public
procurement?