• #Apple Supply chain wouldnt just be illegal in the #US it is also ilegal in China! http://t.co/rQLnzQ4Z #leadership #fail #
• #apple supply chain failures wont be fixed by #NGOs They'll be fixed by pissed off investors http://t.co/SbMTaZC3 #leadership #fail #
• Bill Gates on Using His Money to Save Lives and Fix U.S. Schools http://t.co/3JaOSXTD #leadership #philanthropy #
• #Apple makes a BILLION USD in profits EVERY DAY. #Foxconn workers get paid .30USD an hour. #
• [same as many Chinese Execs] #SteveJobs on #philanthropy increase AAPL’s value so shareholders can #donate own wealth http://t.co/tzXBkfhg #
• RT: @GreenerChina Poyang Lake Pays the Price for #China Progress http://t.co/CH8i7CT6 #environment #water #resource #sustainability #
• [best piece I have seen on #apple #responsibility failures in 5 years] Human Costs Are Built Into an #iPad http://t.co/q840WPby #
• [required reading for all #CSR managers overseeing operations in China] http://t.co/q840WPby #apple #foxconn #humanrights #fail #
• RT @allroads : Is #Apple About to Bottom Out in China? » http://t.co/XCSLFxGE #CSR #leadership #Fail #
• For #China #039;s 'Left-Behind Kids,' A Free Lunch http://t.co/QWxF93Wd #philanthropy #gini #poverty #
• tim cook denies #Apple Has a problem with #China #SupplyChain. Leading the industry (in body count) http://t.co/mS8AAH8g #leadership #fail #
• Engaging #Students to Adopt Sustainability http://t.co/JOsyi8Fk #sustainability #education #MBA #
• Because some lines should be maintained #TwitterBlackout #

Following my posts on the role of business schools as an agent, medium, for sustainability, I felt it was necessary to address the fact that aside from the intentions of the school, the dean, or the professors, the students themselves must be engaged in a manner that provides the best chances for success.

An issue I addressed at a PRME conference in Copenhagen:

For us, the key to successfully engaging the students and having the best chances for long term indoctrination as “responsible” leaders, three things must occur:

1) The issues must be tangible and presented in a tangible way so as to ensure the highest level of student interest in issues.
2) Students must have some flexibility to focus on issues that are most tangible to them as a starting point.  Beyond maintaining a general sense of interest, the more than students are able to leverage their previous work experience as well as match efforts to their future work trajectory, the more likely they are to remain deeply engaged
3) Students need to be able to convert their energy from potential to kinetic.  Knowing that their work can lead to a solution, on whatever level, motivates them to learn more and work harder. Which ultimately provides the best foundation for long term buy-in and practice of responsible practices

these are the fundamentals, but as I continue to find out every year in the classroom and as a project manger, the devil is in the details.  Key to succeeding are effective discussion in the classroom, having interesting/ engaging/ meaningful projects, and managing a team process that the students can enjoy.

It has to be more than about “impact”.  It also has to be about experience.

Without either, and the students will be lost and left to question the value of their experience, and thus the importance of sustainability.

While there are those who feel that China’s economy has no limits, I would like to direct your attention to yet another example of where China’s economy is outstripping the basic laws of environmental carrying capacity.

Poyang lake, located in North Jiangxi province is perhaps one of the largest lakes that you have never heard of, and it is likely that it will be lost. At only 5% of its capacity, this lake is the divider between the lower and middle reaches of the Yangtze river, is one of China’s most important sources for fish, and millions of people rely on it as a water source for drinking and irrigation.

According to a report in May of last year:

China’s two largest fresh water lakes – Dongting Lake in Hunan and Poyang Lake in Jiangxi – are both drying up dramatically and, by Friday, 34.83 million people had been affected in the five provinces, the ministry said, citing reports from local civil affairs departments.

.. a condition that has only grown worse in the last 6 months.

Poyang Lake experienced an extended dry season starting last October, as persistent drought cut the water supply for the lake, which is fed by five rivers in Jiangxi and empties into the nation’s longest river, the Yangtze.

And although seasonal shrinkage occurs every year, this year’s drought was particularly severe. The water level at the Duchang Hydrometric Station fell to 7.95 meters, the lowest since its hydrometric recording started in 1952.

It is a problem that requires a multi-stakeholder fix.

A fix where government will have to re-assess how water is priced, corporations (state-owned and private) will have to reassess their operations and identify areas for improved efficiency, and where farmers will have to assess a better way to irrigate their crops.

It is a problem that, as can be seen along the yellow river and the lakes of Xinjiang province, will ahve a far wider impact should the lake be allowed to continue to be stressed.

Should it fail, should it be allowed to fail,  it will mean having to ultimately relocate MORE people, MORE indutries, and losing MORE fields to a problem which has a solution.

Though my time at CEIBS teaching a course on responsible leadership I have been fortunate to meet peers at other schools and within the corporate world who are looking to push their student (employees) forward on issues of society, economics, and the environment.

It is a process that at times feels like climbing a sheer faced rock, and given the fact that many schools are still hesitant to say their model is in any way broken.. or that the economic model they have been proponents of is somehow flawed…  , but as the pressure on corporate and political leadership grows, so will the calls on business school deans to make material changes to the core of their curriculum, professors, and students.

A process the Rich Lyons of Berkley believes begins with the incoming student application and selection, as mentioned in the Fast Company article What Happened When UC Berkeley’s B-School Cherry-Picked Students Who Personify Its Values

Applicants to the Berkeley-Haas school are now asked to address the four values in one way or another in their application. The admissions class of 2011-2012 is the first class in which all were exposed to the values-influenced application. Dean Richard Lyons, the chief culture builder, challenged the admitted to consider that “the business school choice is lifelong–don’t make lifelong choices that don’t fit.”

Which resonates with a comment that the former COO of Wal-Mart made to my class.  that before firms can speak about, and take action on, issue of sustainability, they must first build a foundation of ethics.  where people understand their own personal role within the greater context and are going to actively engage into the process.

At CEIBS, through a number of initiatives we are seeing that the constant marketing of CSR and sustainability related content in the curriculum is driving a new breed of applicants, and I can only imagine the same is true for Berkley.

There can be fewer examples of an “open secret” in China than the worsening air quality levels in China’s major cities.

For a period, this “open secret” was one that was acceptable by all because of the promise of better days, but following the Beijing Olympics and Shanghai EXPO the air has only grown worse in both cities.  Not better as promised. Which has recently been exacerbated by the sudden realization that government reports were not exactly telling the full truth.

That while the government was “dedicated to transparency” and happy to promote the number of blue sky days in its cities (as a sign of progres), many of the claims were in fact being exaggerated.  A “secret” anyone with a VPN and following the US embassy Air Quality twitter feed was in on, but for others it took more.

And with the US Embassy’s data set painting a very different picture of the conditions that exist, and thus the level of transparency that really existed, Beijing was forced to announce that in Beijing, Shanghai, and Guangzhou, hourly reporting would provide the full data set (including PM25 ) so that citizens would be able to see for themselves.  As is reported in the above clip.

But, even with this new information, it is likely that things are not only going to get worse, and that the pressure on officials to take action (i.e. quick and poorly planned action) will grow.  A quote from the Sydney Morning Herald:

Authorities in Beijing said last month they had met their target of “blue sky” days for 2011, with 274 days of “grade one or two” air quality compared with 252 days in 2010.

But the state-run China Daily has said that if PM2.5 were used as China’s main standard, only 20 per cent of Chinese cities would be rated as having satisfactory air quality, against the current 80 per cent. (emphasis mine)

Which leads me to a point.

Part of the issue we are seeing is clearly about reporting, and part of it is in the underlying issues that exist.  In China, where the economy is growing at levels faster than the control systems are designed to perform there are going to be gaps.  Gaps that can only be identified and addressed through increased data (and analysis), but this cannot be at the cost of the greater picture, and it cannot occur in a way that is destructive to the system.

For Beijing’s part, where this is going to get difficult is that rather than be transparent upfront and then building a system that effectively addresses the problems, it is now being forced into a position where it can only react (in the short term) in a reactionary/ ad hoc means.

.. and while this post is focused on Beijing, it could just as easily be focused on a firm who is outsourcing to China, a firm who has established a joint venture parntner, a firm who has invested into an early stage Chinese firm, a firm who sells to China’s markets through distributorships ..

In the recent entry What really drives value in corporate responsibility? , CB Bhattacharya, Daniel Korschun, and Sankar Sen call into the question the value of CSR programs to the firm, and make three suggestions of how firms can get back on track.

It was an article that for me started off quite well, and does a good job to frame a basic problem of CSR programs:

Few companies are clear about how investing in social initiatives will change stakeholder behavior or the harm a bad strategy can cause.

[...]  We see companies reengineering supply chains to make them “greener,” supporting social causes through volunteer programs for employees, or lobbying for human rights in far-flung corners of the globe.

As this tide swells, many executives are left with the nagging sense that such investments rest on a shaky understanding of how corporate responsibility creates value, both for their companies and for society. Some investments, of course, produce immediate and quantifiable gains, such as those from recycling or from manufacturing processes that save energy. But often, social investments are expected to yield longer-term benefits as engaged consumers step up their purchases, a broader investor base develops, or new talent flocks to a company’s recruiters.

All true (from 30,000ft), and to which they suggest firms do the following:

Don’t hide market motives. Stakeholders are remarkably open to the business case for corporate responsibility, as long as initiatives are appropriate given what stakeholders know about the business, and as long as companies genuinely pursue and achieve the accompanying social value. Companies should understand that they can pursue profitable core business and corporate-responsibility objectives in tandem, without trade-offs.

Serve stakeholders’ true needs. Consumers are drawn to products that satisfy their needs. Likewise, stakeholders are drawn to companies whose corporate-responsibility activities produce solid benefits, which can be tangible (such as improved health in local communities) or psychological (for instance, volunteer programs that help employees better integrate their work and home lives). Before investing in corporate responsibility, however, managers need to set clear objectives that companies can meet and then, ideally, create programs together with key stakeholder groups.

Test your progress. Corporate responsibility acts as a conduit through which companies can demonstrate that they care about their stakeholders. A company should assess its initiatives regularly to ensure that they foster the desired unity between its own goals and those of stakeholders. Calibrating strategy frequently improves the odds that corporate responsibility will create value for all parties.

In my mind, I am a bit taken back by the lacking depth of (1) definition (of CSR) (2) understanding of the problems (that firms face in implementing) and (3) what should be done about it.

As I said, I agree with the frame that they have developed, particularly as speak to firms on a weekly basis who are struggling to find traction, but I would say that the biggest hurdles are related to their specific definitions/ understanding of CSR, the internal capacity that the firm allocates to CSR, the reasons why a firm engages into a program, the duration by which the program is developed for, and the willingness to invest in the program at a level dictated by program goals…. which is really a problem of understanding the value of “CSR”

For me, this is where the real failures exist, and all too often firms find a program co-opted (willingly) by the PR department and after hammering the budget down as far as it can go (sometimes to a point the external PR agency fee is greater than the program cost), the internal stakeholder s lose interest once they have been promoted or the media hits have been counted.

Why does this happen?

Simple, CSR has become synonymous with “donation”, and “donation” cannot be “measured”…it’s “helping the world” and “being better” and not about achieving a goal of any sort (unless media hits is a noble enough goal) and in this context it is no wonder why executives are scratching their heads.

It’s no wonder it’s too intangible to invest in

They are left to find ways to “engage”, but every year it has to be bigger, better, and different than anyone else is doing.  Without any foundation that would allow for a PROGRAM or SYSTEM to be built… it is just event based marketing (internal and external alike)

Without realizing what they should be doing is moving beyond the donation, and the message of being a “good company”, to develop programs that are really engaging their employees/ executives equally over time and in a way that compliments the corporate culture.  For some firms this will be product based (fair trade), or it will be something internal (corporate wellness programs), or it will be operations (facility energy savings), or it will be taking the entire team on a day of building housing for the needy.

For the best firms, the firms that are truly invested in developing a CSR program, it will be all of the above .. and more.

• CSR doesn’t need to be sexy
• CSR Doesn’t need to be innovative
• CSR doesn’t need to win awards

• CSR needs to align to core values of the firm
• CSR needs to designed with a long term
• CSS needs to be communicated effectively
• CSR needs to ultimately have a measurable impact

An interesting conversation between my wife and my recently fired nanny provided an anecdotal insight into the depths of ethics, and the value of ethics, in China.

Wife: “so why did your son left his last job?”
Nanny “the company is a mess, my son managed quality inspection for car parts and his manager just want him to keep one eye open one eye closed, so they can meet production quota. My son feels that if he let the bad parts pass, it is very irresponsible act because that could cause danger to others.”
Wife: Impressed by her son’s sense of integrity “good for him, he should do what he believe is right!”
Nanny: “lately he has been researching and he think he would like to go into third party auditing!”
Wife: “that’s great, is it because this way he can stay objective and make sure things are safe before anything can go into the market?” me thinking China really needs more people like this…..there is hope for the post 80s after all!
Nanny: looked confused and tries to clarify “no, you know if you are in those jobs, people will have to give you a lot of under the table money before you would give them an inspection passing chop!”

To be clear, this (former) nanny was born and raised in Shanghai, and this conversation confirmed et again that not only is there more work to do ingrain ethical standards on the street level, the 3rd party audit industry is still clearly one that itself could use some shoring up.

Without a doubt, the latest campaign from Operation Smile sets THE example for how NGOs can better communicate their cause, their role, and their impact.

The campaign absolutely KILLS IT, and going forward this will be required viewing for the NGOs/ Social enterprises I work with.

Over the last 2-3 years, one of the more interesting developments in China’s philanthropic landscape has been the explosion of foundations that have come onto the scene. Interesting because as the number of foundations, and the number of celebrities/ CEOs opening their own foundation, grew there was a general belief that this would improve the mechanisms for giving, transparency, and impact.

However even as the number of private foundations is now greater than public foundations, which would normally be taken as an encouraging sign, there are now more discussions about the impact thus far has been and how things will move forward.

To date, much of the discussions have been focused on the fact that much of the money is sitting idle on the sidelines as many foundations either (1) don’t have the staff who are capable of transacting or (2) there are no qualified groups ready for the money.

Which is a problem because, according to much to many, these foundations are being seen as “the answer” to China’s philanthropic development.  They were going to bring the money, which would improve NGO capacity/ impact, and would (most importantly) demand a higher level of transparency from benefactors.  To some that was all that was needed.

When reading the article Philanthropy’s New Agenda: Creating Value, by Michael Porter and Mark Kramer, the proposed early in the article that the reason foundations exist, particularly grant-giving foundations exist is to be

intermediaries between the individual donors who fund them and the various  social enterprises that they, in turn, support. But if foundations serve only as passive middlemen, as mere conduits for giving,then they fall far short of their potential and of society’s high expectations.

Foundations can and should lead social progress. They have the potential to make more effective use of scarce resources than either individual donors or the government. Free from political pressures, foundations can explore new solutions to social problems with an independence that government can never have.

Which in my mind is certainly not the case in China (at this time) practically, but is being sold as such.

In fact, unknown to many donors who I speak with about foundations in China, few realize just how these foundations are established, to whom they are investing money with, or what the real impact will be.

That while the word (and structure) “foundation” is supposed to be linked to “independence” of thought, operation, and accountability, the reality in China is that many of these foundations are still closely tied to the large GONGOs that everyone has been trying to get away from.  A condition that only really become focused on when Jet Li looked to separate himself from the Red Cross.  An organization that he leveraged to get started, raised a lot of money for, and then hit the administrative wall.

So, while donors may have in mind independent organizations who are raising money in the name of a good cause, and are then building an organization that then seeks out (and invests in) the “strongest partner”, the facts are actually quite different.

Which leads to the first issue.  That, as organizations dependent on GONGOs for a legal and programming shelter, the impact of the foundation as a separate legal structure looking to fund social innovation is largely lost to the policy needs of the GONGOs.  Policies that are set on a yearly basis, based on policy objectives set by those behind the 5 year plans, and create a reward structure that supports the implementation of those policies.  And nothing else.  In fact, were a large foundation to look for a partnership, one of the biggest issues they would face would be the fact that the GONGO tied into a reward system that sees their partnership as more risk than reward.

Which has an impact on operations.

This brings about the second, and perhaps more important, issue.  Which is that the foundation may ultimately find itself unable to work with certain groups or issues because it would not align with the needs of the GONGO… and the GONGO will have certain requirements before it is able to release the funding.  So, even if the foundation finds the program and organization worth funding, it may be difficult to.

However, all this aside, when reading further into Porter’s article, I realized that there was another conversation that still needed to take place.  Related to the fundamental efficiency of foundations, and whether or not these are the best vehicles financially to put the most money to use.

When an individual contributes $100 to a charity, the nation loses about $40 in tax revenue, but the charity gets $100, which it uses to provide services to society. The immediate social benefit, then, is 250% of the lost tax revenue. When $100 is contributed to a foundation, the nation loses the same $40. But the immediate social benefit is only the $5.50 per year that the foundation gives away – that is, less than 14% of the forgone tax revenue.

Keeping in mind that the basic regulations and tax codes surrounding NGOs has a long process before completion, and the only time private individuals are given full tax deductible status is in the face of a national disaster, the economic model that Porter lays out in the above is a very important one. Particularly as China’s planners look at finalizing the various legal and tax mechanisms that govern foundations and NGOS.

Last night, and this afternoon, I had a bit of a scare.

A donor to one of the organizations I have been working with, a long time friend, sent me a message that she was pulling her donation because of an error I had made.  It was a simple error in failing to recognize her firm as agreed on.It was an honest mistake, but one that tipped her over the edge.. or so I thought

.. it turns out she was not actually pulling the donation, but trying to make a point …

Regardless.  It led me to spend a few hours thinking about the fact that donor trust in China is an at absolute low and that while the government has been making a number of announcements about their seriousness to clean up the system the fact is that the damage to the system has already been done and the resiliency of donors (financial and otherwise) is thin at best.

And when reading articles like Volunteering is not voluntary, it is not hard to see that the problems with the system are deeply rooted in issues that go far beyond tax codes, regulations overseeing NGO licensing, or errors of accounting.

From the second paragraph:

Just two days after the semester began, Xia and 119 other advertising and exhibition majors were told their classes were being suspended so the students could “volunteer” at the second World Leisure Expo in Hangzhou. Starting the next week, they would be bused from the university’s City College to the venue to work seven hours a day, six days a week. The trip takes two hours each way.The notice quickly stirred up dissatisfaction among students and their parents, developing into a protest against compulsory volunteerism, servitude versus service.

The problem, as explored by the article, is that students are a “ready” pool of volunteers for some, and due to the influence of those particular agents/ organizations, they can be easily allocated to the “cause”. A problem that is different in mechanism, but no different than the tactics that are used to drive many of China’s private donations.

And as I have mentioned in other posts, this is where the system is fundamentally broken and is in need of immediate repair IF (and I emphasize IF) there is EVER to be a broad based engagement in civil issues by the average Chinese citizen.

That, while the current system is effective in driving short term statistics (record number of volunteer hours or funds raised), in the long term these tactics are in effect reducing the resiliency of the system. And instead of creating a true culture and process of engagement where citizens are willingly (and perhaps enjoying) donating their time and money, what is happening is that those very people are being turned off. Retreating from even the basic acts of doing good, and doing what they can to find problems with even the best organizations.