Category Archives: Strategy

The Easiest Environmental Decision You’ll Ever Make

Posted on by
3

Hillary Clinton says: “Climate change is an urgent threat and a defining challenge of our time.”

Donald Trump says: “I don’t believe in climate change. … It’s a hoax.”

Greenland ice melt Sept 2016, courtesy of John Englander

If you understand that climate change is real and happening and of huge importance, that doesn’t leave you much to decide. That’s a political decision, of course.  I don’t usually write about politics.  But the policy implications of the political outcome are just too big to ignore.

This isn’t one of those issues that gets lost in the swamp of charges and countercharges and the race to the bottom of whom you trust least.  This doesn’t depend on which cable news channel you watch. Just go to the source.  Go to their campaign web sites:

  • Hillary Clinton’s web site lists “Environment” as a top level issue. Donald Trump’s web site  has no Environment section at all. His site has an “Economic Vision” section which includes “Energy reform”, where he addresses environmental issues.
  • On the Paris Agreement: Clinton’s “Environment” section begins, “Hillary’s plan will deliver on the pledge President Obama made at the Paris climate conference.” Trump’s site says: “Cancel the Paris Climate Agreement (limit global warming to 2 degrees Celsius) and stop all payments of U.S. tax dollars to U.N. global warming programs.”
  • On the Clean Power Plan: Clinton promises to “[d]efend, implement, and extend … the Clean Power Plan and standards for cars, trucks, and appliances that are already helping clean our air, save families money, and fight climate change.” Trump promises to: “Rescind all the job-destroying Obama executive actions including the Climate Action Plan…..”

That leaves no choice. A vote for Hillary Clinton is a vote to admit climate change is real and make urgent progress to deal with it.  A vote for Donald Trump is a vote for denial – denial of science, denial of reality, and denial of our responsibility to our future, our children and our world. And make no mistake.  A vote for anyone else – or failure to vote – is, in effect, a vote for Trump and denial.

If this discomfits any of my clients or partners, so be it.  This issue is too important to be left vague.  I do want to be very clear: I am speaking for myself, and not them (please see my usual disclaimer below.)

To those clients, though, I would suggest a few moments’ reflection.  I am deeply sympathetic to the challenges of stranded assets – not to mention stranded careers, pensions and egos.  However, I also know that many clients in fact do understand climate change but find it politically uncomfortable – if not dangerous – to speak openly in their companies.  To those clients, I would say: “Let’s talk about how to exercise responsible leadership in your company  without committing suicide.  Let’s talk about ‘leading from below.’ But please remember, your company won’t be in the voting booth with you.”

As a strategist, I would advise even those clients who don’t agree to think carefully.  Public demands for climate change action will continue and intensify, regardless of the outcome of the election.  The question is whether government will step up and play its role to lead on solving public policy issues, or step back and leave business to bear the brunt of those demands.  Would you rather have rational public policy that sets clear expectations applying to all companies, creates a level playing field and spells out what should be disclosed?  Or would you like intensified guerrilla warfare with your consumers, customers, investors, employees and the media?

Doesn’t seem like that hard a decision.

[Opinions in this blog are solely those of Scott Nadler and do not necessarily represent views of Nadler Strategy’s clients or partners, or those cited in the post. To share this blog, see additional posts on Scott’s blog or subscribe please go to nadlerstrategy.com.]

Mylan, EpiPen and the Fog of CSR

Posted on by
2

Mylan has received plenty of attention lately for the decision to dramatically increase pricing for the life-saving EpiPen.  The intense debate about this decision points to a broader problem: the fog that surrounds Corporate Social Responsibility (CSR) and its many definitions, levels and claims.  This fog can obscure efforts to improve how business functions.  Mylan is an interesting case study.FogRoad

Mylan and CSR

Mylan’s CEO Heather Bresch defended the EpiPen price increases, blaming the healthcare system and saying “The system incentivizes higher prices.” She offered her view of stakeholder concerns a year ago when attacked for financial moves: “I try to look at it from the perspective of I should be flattered that so many people are trying to tear us down.”

Wouldn’t it be great if a pharma giant like Mylan were headed by a CEO who cared about CSR?  Someone who might say:

“…[W]e put people and patients first, trusting that profits will follow. This philosophy, which we call Doing good and doing well, reflects our belief that [our company] is not just a company, we’re a cause. … we weigh every decision we make with the utmost care, asking ourselves how it might affect all of our stakeholders, including patients, customers, employees, communities, vendors, creditors and investors.”

Oh, wait. Mylan’s CEO did say that.  That’s a quote from the CEO message at the front of  Mylan’s 2015 social responsibility report “which is designed to acquaint you with our many CSR accomplishments to date.” The report goes on to say: “Our shared belief in Doing good and doing well is based on our values, which we express every day through our actions.”

Reviewing Mylan’s CSR report and Mylan’s actions “every day” on EpiPen pricing may produce cognitive dissonance.  Something doesn’t connect.

The Fog of CSR

This disconnect could be just the frequent CSR gap between “what we say” and “what we do”.  That’s not uncommon.  Too much CSR reporting is still flat-out greenwash.

The Mylan disconnect might be something deeper: Mylan may interpret CSR differently than do some of its stakeholders (like patients).  That’s disturbing but not surprising.  CSR has become an esoteric topic, filled with systems, standards, guidelines, goals, and acronyms.  There is an entire industry of folks who set CSR expectations, write reports about meeting those expectations, and evaluate reports to see if they met those expectations.  It’s all too easy to separate all that CSR stuff from what companies actually do in their day-to-day business.

(To make matters worse, “CSR” is just one label.  There is huge confusion around CSR versus “Global Citizenship”, “Sustainability”, “Sustainable Development” and a plethora of other terms. That babel only adds to the fog.  Anyone using those terms should examine them carefully, and consider whether they are using those terms as tools for clarity or as weapons to keep up the fog level.)

Of course, some companies do very good things.  Some of them go to great lengths to show how those actions fulfill their responsibility as companies, and meet public expectations.

For some companies, though, CSR is just a cost of doing business, something you have to salute and spend some time and money acknowledging.  And for some companies, CSR seems to be a menu, from which they can pull out the parts they like and ignore the rest.

Cutting through the CSR Fog

In practice, CSR is a hierarchy of behavior, not a menu.  In working with a wide range of companies on CSR, I’ve seen five levels of what we actually expect from a socially responsible corporation. There is a clear hierarchy among these, starting with the most basic expectations at the bottom.  Interestingly, the first three are just corporate versions of “personal social responsibility”: we would expect them of our neighbors.  The last two are uniquely corporate.

  1. Don’t be a jerk. Don’t unnecessarily harm people, animals, the environment, even if there’s no law against it. Think of this as the “don’t be a bad neighbor” level: cut your lawn, don’t leave trash out in the yard, don’t start using loud lawn equipment when the neighbors have the kids’ birthday party, don’t take up every parking spot on the block, don’t shout offensive comments or names at people walking past your house, and promptly shovel your own walk when it snows. Don’t expect to get any credit for performing at this level. If you don’t perform, though, don’t be surprised if the neighbors are critical of anything else you do.
  2. Don’t break the law. Laws are supposed to apply to everybody. Don’t speed in the school zone, don’t shoot out your neighbor’s windows.  Again, don’t expect a whole lot of credit for fulfilling this expectation.
  3. Do your part. Actively be a good neighbor. Help mow the elderly neighbor’s lawn or shovel their walk when it snows. Volunteer at your school. Donate food to the local food pantry. This offers the chance to get credit for your actions, without actually having to change how you live (or do business) day-to-day.  This is the level of CSR many companies are happiest to focus on.
  4. Do what the law fails to do. We ask business to do what we can’t get government to do. Climate change is the clearest example: it is a classic public policy challenge, which should have been met by public action years ago (carbon tax, cap and trade, regulation, whatever). Business doesn’t want to be in the business of filling this public policy gap. Many businesses would prefer to see a public policy solution that creates clear expectations and a level playing field.  Business could then do what it does best: figure out how to make money in that new reality, by cutting carbon or investing or innovating. Instead, business has to guess where the bar “should” be, risk incurring costs that more recalcitrant competitors don’t face, and incur the wrath of investors who question why business is acting on what is really “Government Social Responsibility”.
  5. Do what the law can’t do.   Innovate. Invent the new technology that reduces carbon. Develop the approach that feeds more people. Raise the bar and challenge your competitors to follow you.  Drive your business by seeing CSR issues as strategic opportunities.

It’s all CSR?

The problem is that all of this is called “CSR”.

Arguably, Mylan may be doing great things in level 3, but missing (or ignoring) what it is doing with EpiPen pricing in level 1. If you’re not getting the basics right, don’t expect people to be impressed by anything else.

No company has to agree with this CSR hierarchy.  But every company should take a serious look at what it has bundled in its CSR portfolio, what terms it’s using (CSR versus Sustainability et al), what it claims in its CSR report, and what it’s doing in its business day-to-day.  At the very least, that might help burn off some of the fog and let in some clarity within the business.

[Full disclosure: I did a small bit of consulting work with Mylan on CSR approximately 5 years ago.  Nothing in this post reflects any confidential information or insight from that engagement.

Opinions in this blog are solely those of Scott Nadler and do not necessarily represent views of Nadler Strategy’s clients or partners, or those cited in the post. To share this blog, see additional posts on Scott’s blog or subscribe please go to nadlerstrategy.com.]

Redesigning EHS amid the chaos

Posted on by
Reply

It seems strange to talk about organization amid all the current national and global turmoil.  But people still have to do their day jobs and fulfill their responsibilities to their companies, their people and themselves, so the discussion goes on.  Especially because turmoil – much less dramatic than on the national stage but disruptive all the same – is going on at so many companies.

The challenge for high value, low visibility functions – like EHS – is to redesign themselves for life after the turmoil, without having the luxury of waiting for all the smoke to clear.  The most visible situation is post-merger. But the same chaos and need also exist in other corporate disruptions including acquisitions, corporate splits, the dreaded “new strategy” and ensuing reorganization, or simply massive downsizing (“de-organization”).

Let’s face it.  In most of these corporate shuffles, functions like EHS are an afterthought. It would be nice to think this will change as companies mature, that senior management will recognize the virtues and talents of the EHS organization and protect the exceptional people and programs that have already been established. Sadly, that’s unlikely to happen. Irrational and arbitrary cuts will happen. The EHS organization will have to find ways to step up both efficiency and effectiveness, not trade off one for the other. EHS leaders have to deliver the value their company needs within the budget and organizational envelope the company wants.

Organogram AbstractionThis is serious stuff. Bringing two companies’ EHS departments together post-merger isn’t like hosting a wedding dinner where the biggest problem is keeping the two families apart, containing the obnoxious relatives and stretching the alcohol budget.  This goes well beyond drawing up the tables and assigning seats. This is a serious strategic process with implications for business performance, EHS performance, and careers.  It requires asking the tough questions — even if you have to answer them yourself.

Some EHS leaders do a great job of this.  In one recent acquisition the EHS leader of the acquirer framed the strategic questions even before he was sure he had the top EHS job.  As soon as he got the nod, he developed clear hypotheses of what the new, merged company would be like and what it would need from EHS.  Without waiting for guidance, he proposed cutting out an entire layer, designing new centers-of-excellence based on emerging needs, and staffing those centers based on skill rather than prior job levels. At a stage where his peers are often waiting for direction and facing budget death of a thousand cuts, he has a plan, won approval (or acquiescence), and is busy creating an effective new leadership team.

A colleague and I pulled together some of the lessons learned from lots of painful experience in a new article, After the Deluge: Designing EHS Organizations for Post-Merger Companies.  Take a look.  Share your experiences, either in comments on that article or back on this blog.  And good luck to all.

[Opinions on this site are solely those of Scott Nadler and do not necessarily represent views of Nadler Strategy’s clients or partners, or those cited in blogs. To share this post, see additional posts on Scott’s blog or subscribe please go to nadlerstrategy.com.]

Sea Level Rise: We know now what we’ll wish we knew then

Posted on by
Reply

I’ve spent 40 years working on investment and disinvestment decisions, both in the public and private sectors. I’ve worked with railroads, ports, transit lines, and thousands of business location decisions. All too often I’ve looked back at my past decisions and said: “I wish I knew then what I know now.”

IMG_0063With sea level rise (SLR), we do know “then”.  It’s a natural disaster in slow motion.  It’s like a bad disaster movie: the avalanche or crashing oil trucks are heading our way and we can’t stop them. Sea level rise, though, is in slow motion. With this disaster, we have time to prepare.  But we have to actually decide to do something about it now.

I thought I had a fairly sophisticated understanding of sustainability related issues.  Then I heard John Englander talk about climate-enhanced Sea Level Rise (SLR).  He made a compelling case that no matter how much progress we make on climate change, some of the damage is already done. Faster sea level rise is inevitable and sooner than I thought.  Englander and other scientists predict that we could have a  foot of global average sea level rise by 2050, possibly more.  (And the awareness of sea level rise and its impacts is growing each week.) John’s observation was that very few businesses, cities or individuals are facing up to this prospect.

After hearing John speak, I did my due diligence. I read his writing.  I read the reviews and commentaries. I tracked him down and talked with him intensely.  I had a respected friend with a strong background in marine sciences vet the science.  I learned some things:

  • A lot of impacts are going to be felt much sooner than I’d realized. As we saw with Hurricane Sandy, a few inches can make the difference between a near miss and devastated infrastructure.
  • A lot of impacts are going to be felt more broadly than I’d realized. SLR is not just a concern for the usual suspects like people living in south Florida or working in low-lying harbors. Consequences may be felt physically in upriver inland locations like Sacramento. Commercial or personal consequences may be felt anywhere if you do business with or ship through a vulnerable area – and almost all shipping goes through those areas.  Not to mention airports – ever come in for a landing over water and hold your breath waiting for land to appear under the wings before you felt contact (think Logan, Laguardia…)?

Some people and businesses are acting on these insights, but not many.  Interestingly, those who are acting don’t advertise: if you’re seeking business advantage by moving ahead of the crowd, why tip everyone else off? Overall, though, as businesses decide whether (or where) to buy or construct a facility that should last 20 or 30 years, most are not yet considering whether that facility will be viable – or dry – in that time frame.

Test yourself on this. If you have a responsibility for investment or disinvestment in assets, the question is: why aren’t you motivated? Do you know what your exposure, risks and unrealized opportunities from SLR may be? If you have a fiduciary responsibility for a company, a real estate portfolio, an investment portfolio, have you done your due diligence?  If you deal with strategy decisions or capital investment for a railroad, a utility, a municipality, have you done your due diligence? If you are an insurer or reinsurer of any of the above, have you done your due diligence? If you compile your company’s reports to investors and the SEC, have you done your due diligence?

If the answer is no, you’re not unusual. As a species, we’re real good at acting when things are “urgent to finish”.  We’re motivated by deadlines.  We’re much worse when things are “urgent to start”.  If a task takes a week and the deadline is next week, no worries: we’ll get it done.  If a deadline is three weeks away but it’s going to take 5 weeks to get the job done, it’s even more urgent to start.  But we don’t get too motivated by that.  And if the deadline is measured in years, it’s still being debated, and it’s intimidating in its enormity, all the more likely we won’t focus now.

And these aren’t easy times for a business to look ahead. CEOs face a lousy macro-economic situation (and maybe macro-political too). With a tough economy and a scary election, they understandably may feel that they have enough on their plate.  If I were a CEO, I might be afraid that the sky will fall before the ocean will rise.

Intriguingly, though, there are ways to start acting now, to start doing now what we’ll wish we did before “then”. There are opportunities to spend capital more wisely.  There are opportunities to invest in options now, acquiring property or property rights on less vulnerable locations before the market prices those up.  There are opportunities to shift investment out of more vulnerable locations and activities – before the market begins to discount their value.  There may even be opportunities to spend less, by realizing that the useful life of some SLR-impacted facilities may be shorter than we think.

That’s why I decided to join with John and see if we could help businesses and industries get on with it and act.

The good news is, we know now what we’ll wish we acted on then.  There’s time to act.  But it is increasingly urgent to start.

[Unconventional disclosure: Normally bloggers disclose their financial interest in a topic so you can think about whether it influenced their views.  This time, it’s the other way around: my views on the topic led me to create a financial interest by starting to work with Rising Seas Group.]

[Opinions on this site are solely those of Scott Nadler and do not necessarily represent views of Nadler Strategy’s clients or partners. To share this post, see additional posts on Scott’s blog or subscribe please go to nadlerstrategy.com.]