Mylan, EpiPen and the Fog of CSR

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.]

I was wrong about CSR/sustainability reporting

I’ve been skeptical about the value of CSR/sustainability reporting.  I now have to admit I was wrong. Partly.

For years, I viewed reporting as a necessary evil: necessary for transparency and meeting stakeholder expectations, but evil in terms of disproportionate effort and dysfunctional impacts on strategy.

I’m not opposed to reporting.  Going back to the first corporate environmental reports in the 1980s, doing a report has been a great way to hold up a mirror for senior management, helping (or forcing) them to see how their company looks from the outside in. (Disclosure: ERM is one of the world’s leading providers of EHS/CSR/Sustainability reporting services.)

But I have been wary. In an early blog, one of my new year’s resolutions was:

4. Don’t confuse reporting with doing. Transparency is important, but results are more important.

Many readers agreed, saying “too much time spent chasing data to report has led to putting off long term strategizing,” or noting:  “I liked #4 a lot as reporting can take an inordinate amount of time!” I’ve echoed those sentiments over the years.  I’ve frequently urged clients: “Don’t let the reporting tail wag the performance dog.” I often quote a client who said: “I’m afraid my reporting is writing checks that my performance can’t cash.”

Now, though, I’m seeing companies use the reporting process as an incredible strategic tool, as a lever to raise the strategic discussion in their company.  What’s changed?

Fundamentally, the reporting process (in some companies) has changed from peer competition and branding, to a truly strategic process admittedly with branding implications.  Give credit to evolving GRI guidelines, growing analyst attention, and simply the maturing of the art form. Give some credit also to the great subversive work of the green whisperers.

In the past, the reporting process juggled several questions:

  • What do we want to talk about?
  • What good pictures, stories and data do we have that we can use?
  • Who – if anyone – is listening?
  • What do the loudest stakeholders want to hear about?

Increasingly, the process revolves around four very different questions:Reporting-Process (1)

1. What matters?

“Materiality” has finally gotten serious. It has become a true business risk process, asking “what matters to the business?” and “what matters to the stakeholders who matter to the business?”

2. What do we do about “what matters”?

This is the real strategic opportunity. You don’t have to just lunge from materiality to writing any more. This is a huge change.  This step can drive deep questions of goals, priorities, and performance.

3. What do we say about what we do?

You have to talk about “what matters,” but more to the point you have to talk about what you’re doing about the issues that emerged from question #1.

4. What do we do with what we say?

In some companies the emphasis is shifting from “the report” to “communication and reporting.” It’s a process now, not an event.  As one colleague pointed out, “We focus on who owns each chapter of the report going into the process.  We don’t talk about who owns each section coming out of the report.” That’s the emerging challenge: integrating the annual document into an on-going process of communicating with (not just to or at) stakeholders, both inside and outside the company.

Is the process perfect now? No.  Can it still take too much time and attention? Yes. Can the tail still wag the dog? Sure.

But the trend is going the right way. Some companies are using the reporting process to drive deep discussions of business risk, prioritize actions, and stimulate on-going dialog. In some cases, this is an evolution in the companies who were already leaders.  In other cases, it’s a “leapfrog” opportunity for companies who are coming late to the game: they are starting out with a focus on strategy, rather than having to unlearn or dismantle a document-driven, communications-only process.

“Necessary” is increasingly trumping “evil.” I guess I was wrong.

[Scott Nadler is a Senior Partner at ERM.  To share this post, see additional posts on Scott’s blog or subscribe please go to snadler.com. Opinions on this site are solely those of Scott Nadler and do not necessarily represent views of those quoted or cited, ERM, its partners or clients.]