Brands will shape Global Labor Standards: Apple-Foxconn Company

Tim Cook, Apple COO, in january 2009, after Ma...

Tim Cook, Apple (Photo credit: Wikipedia)

When Apple signed on to Fair Labor I wrote a column in which  suggested that the logic of their decision – a big shift in approach post-Jobs – would be to bring about alignment between western and  Chinese labor standards. Nothing that has happened since has changed my view. Not that this will happen overnight, of course. But it’s the result of several potent forces that are shaping, not least, this company’s effort: branding and global communications. Whereas these forces twisted the unwilling arm of Nike what seems a long time ago, the superlative quality of the Apple brand and the explosion of social media are together pouring gas on the flames.

While it has been traditional to label western brand efforts to ensure decent manufacture conditions for their products as “corporate social responsibility,” the logic of the Apple case demonstrates that it is naive to see CSR as an adjunct effort, or a marketing ploy, or as anything other than central to value. It’s a case where the values-value connection (another theme of mine) is especially glaring.

The harrowing case of the Foxconn worker with severe brain damage, whose family is now going to the Chinese courts to seek to maintain full company support of their son, drives the point neatly (if tragically) home. This man is, as all can see, a de facto Apple employee, whose conditions of service are so far removed from those of the guys at HQ as to be hard to compare. As his family struggles to ensure that he has long-term care after an undenied industrial injury, they have a bullhorn to the world, and that includes the fashionistas for whom the latest Apple gadget is a must, and who have helped drive up its astronomical share price and stack up a mountain of dollars that could buy Facebook twice over for cash (or buy everyone on the planet a half-decent bottle of wine). As the technological gap, and the design gap, between Apple products and those of its rivals narrow, the brand magic is going to be even more key – and therefore even more exposed.

It was a smart move for Tim Cook to jump into Fair Labor, and then arm-twist Foxconn into big wage increases. It would be even smarter for them to leapfrog the moral/CSR competition and drive excellence in Chinese manufacturing and labor practice without needing to be pressured further.

Foxconn goes to court over severely injured worker | Business Tech – CNET News.

CSR around the world

It’s hardly a surprise that CSR evokes differing responses in different cultures, not least as we know it does in our own. And when we add an awareness that “CSR” is really a mashup of Stages 1, 2 and 3 – philanthropy, CSR proper, and third-gen Michael Porteresque “shared value” – it gets even more complicated (and interesting).

The Apple Fair Labor decision is a straw an an interesting wind, and we should perhaps correlate it with the SOPA story that has united “the internet” against certain old economy interests in the United States and the political support they would normally expect to find. That is to say, social media and the global playing-field are flushing out issues of alignment and recalibrating risk in ways hard to have predicted and constantly shifting.

My sense is that global CSR is in a thoroughly embryonic state, especially at the grassroots (aka executive) level. But embryos are growing very fast today, and how the CSR debate is shaped – the language we bring, the extent to which clear alignment with building sustainable value is credibly claimed – will shape an emerging global situation that is very fluid indeed.

On Michael Porter’s Shared Value Salvo

Wrote this originally on Michael Porter‘s Shared Value article for my U.S. Chamber of Commerce column. Values and value go beyond the “CSR” agenda and intersect in ways that are going to get more and more interesting.

Michael Porter’s salvo: one of our greatest business gurus redefines capitalism. Perhaps.

There’s been a lot of talk about the “new CSR” – corporate social responsibility as something other than philanthropic giveaways with an eye on looking good. Which may be an unfair way to characterize corporate engagement in social good over the years – from Rowntree to Hershey to Tata – but the split between gross generosity after the fact (Carnegie will always be the best/worst example) and marginal generosity during, has been almost universal. We recently discussed this in the context of Gates and Buffet. The business of business, has gone the mantra, is to be successful as business. What owners of capital do with their profits is up to them.

The shift to a more holistic model has been underlined dramatically by Porter’s intervention.  Those who have not labored through MBAs need to realize who this guy is. There’s probably no-one on the business school circuit who has been respected quite so much, for his brilliance and detailed-minded laying the foundations for clear-minded, strategic, business thinking.

Porter is in no way talking about sprinkling money around to good causes to burnish brand. He is after a whole new understanding of capitalism, in which “shared value” lies at the heart of value creation, and aligns innovation and the community’s good as well as profits. It all seems too good to be true, and the critics (cynics? perhaps, perhaps not) have been out in force. Even that beacon of balance The Economist found itself slyly quoting an off-the-record comment from Larry Summers at Davos: “Does he really believe this s***?”

Well, anyone who is aware of what’s what in 2011 knows that paradigms are being shattered all around us. One of the characteristics of a paradigm shift is that a lot of people – including generally the smartest, wisest, most respected – are sure it will not change. Someone comes along and challenges their view, and is derided all round. Until suddenly change has come. Then the outlier who sounded crazy becomes leader of the new pack, and everyone claims that’s what they were really thinking all along.

That having been said, this is pretty strong stuff. Listen to the Great Man: The concept of shared value recognizes that societal needs . . . not just conventional economic needs, define markets.” And more: this is not about redistribution of value – sharing what the firm has created – but “it is about expanding the total pool of economic and social value.” Porter brings this back to his approach to creating value: “Strategy theory holds that to be successful, a company must create a distinctive value proposition that meets the needs of a chosen set of consumers. The firm gains competitive advantage from how it configures the value chain . . . .” He argues that in recent decades companies have narrowed their vision of how to create value, and seen value as quite separate from the good of the community except insofar as consumers need to like the brand.  At the same, time, visionary approaches have moved the other way. Fair Trade. Wells Fargo’s efforts to help consumers budget and cut debt. GE’s Ecoimagination lines. And innovation has been spurred in the process.

What to make of all this?

Three things are very clear. First, straws are blowing in a wind of change. How fast is it blowing? We do not know. It is unlikely to be the case that within X years, suddenly, social good will be the driving force of capitalism, the need for much of the government and private philanthropy will fall away, and we shall be close to heaven on earth. But a trend is a trend. Kudos to Porter for jumping ahead of the curve.

Second, as I have been arguing elsewhere, the speed of change and the impacts of emerging technologies are becoming more dramatic by the day – which means that the values of society are more and more important as new products and services are developed. Values create markets. The more revolutionary products become, the more important it will be for them to sync with the values of their prospective buyers. And, in parallel, with their risk tolerance: regulatory regimes themselves are ultimately the result of the values of the community.

Third, Porter has picked a great time to focus the issue in this way. There is widespread unease, inside and outside the business and finance communities, at the tendency of capitalism to focus on the short-term and to disjoin long-term good (even in simple economic terms) and short-term incentive (banks may or may not be too big to fail; why can’t bankers fail?).

So the stakes have been raised – both on the CSR end of this debate and on the future of capitalism itself.

Let him have the last word: “The principle of shared value creation cuts across the traditional divide between the responsibility of business and those of government or civil society.”

Creating Shared Value, Harvard Business Review, Jan-Feb 2011.