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20th Anniversary of the CBS Sustainability Centre

12 November 2022 by mek.msc@cbs.dk

When
Wednesday, 7 December 2022, 14:00 CET

Where
Dalgas Have 15, 2000 Frederiksberg
Room DH.Ø.1.41

Duration
2,5 hours (plus social gathering. See programme below)


Programme & Sign Up

Join us in celebrating the 20th anniversary of the CBS Sustainability Centre!

The centre came into being in May 2002 under the name CVR – Centre for Corporate Values and Responsibility. Later name changes into cbsCSR and then, in 2018, CBS Sustainability reflect changing research, teaching and dissemination agendas at CBS as well as wider societal developments in the realm of corporate responsibility and sustainability. That the centre has become a permanent presence also reflects the development of CBS as a business university over the last couple of decades.

The anniversary celebration will take a look back at the history and accomplishments of CBS Sustainability and its past and present members within the bigger scheme of things that is CBS. However, the occasion will be used primarily to discuss current and future opportunities and challenges in the field of sustainability. The anniversary celebration will thus provide snapshots of current research at the centre (and opportunities to discuss this research), and a panel debate with colleagues bringing different perspectives on the grand challenge of decarbonizing production and the economy.

After the formal part of the anniversary, there will be a social gathering at the centre.

Should We Boycott the FIFA World Cup in Qatar?

9 November 2022 by mek.msc@cbs.dk

On 20 November, the FIFA World Cup in Qatar is opening its doors. Billions of football fans around the world will tune in and watch this mega sport event. As we are getting closer to the opening match, I am often being asked whether I believe it is responsible to watch the World Cup or whether it is better to boycott the tournament. Here is my personal assessment.

Human Rights Problems – More Than Labor Rights Violations

While the labor conditions of migrant workers in Qatar have attracted most media attention, the human rights problems go much further. Journalists are thrown into jail while covering stories around working conditions, the LGBTQ+ community is subject to ill-treatment, and women’s rights are still significantly curtailed.

Those arguing that the country made progress in terms of human and labor rights have a point. The kafala system – a system leading to the exploitation of migrant workers that can potentially give rise to forced labor – has undergone some reform in 2020, however, this is ten years after the country was awarded the World Cup and it only happened after significant pressure. It is also true (and noticeable) that Qatar is the first country in the Arab Gulf region to have made such changes.

But should we celebrate this as an achievement of the World Cup taking place in the country? Following this logic, we should award countries that limit human rights mega sport events in the future hoping that these countries may agree to reforms that are long overdue. Also, who tells us that Qatar will keep making progress in terms of human rights after the World Cup has ended and media attention has vanished?  

Just a few days ago, one of the official World Cup ambassadors, Khalid Salman, talked about gay people in an interview with German television. He mentioned that “We will accept that they come here. But they will have to accept our rules.” He then moved on claiming that gay people are “damaged in their mind.” At this stage, a spokesperson of the World Cup organizing committee (who was shadowing the reporter while being in Qatar) stopped the interview.  

Some supporters of the Qatar World Cup argue that we did not “make such a fuzz” when the tournament took place in Russia in 2018, just four years after the illegal annexing of Crimea. In 2018, Russia faced significant human rights challenges, some of them very similar to the ones of Qatar (e.g., lack of freedom of speech and ill-treatment of LGBTQ+ community). While it is difficult to directly compare both cases (e.g., labor conditions were not that debated back then), it would be misleading to justify one problematic mega sport event through lack of attention to another one.

A Corrupt Bid

One of the strongest controversies around the World Cup has been around whether the bidding process was influenced by corrupt behavior, a claim that Qatar has long denied. However, a longstanding investigation of the U.S. Department of Justice claimed that representatives working for Qatar and Russia bribed FIFA officials ahead of the 2010 bid.

In 2020, the New York Times reported that three South American officials received payments to vote in favor of Qatar and Russia according to the indictment. In the end, Qatar defeated the U.S. in the bidding process. At the time of the vote, the FIFA committee was already diminished by two members who were secretly filmed while agreeing to sell their votes.

Of course, Qatar is not the only country to have won a World Cup through a corrupt bidding process. Investigations revealed that Russia’s bid for the 2018 World Cup was also linked to bribes, and the German World Cup in 2006 was also allegedly linked to dubious payments. Yet, we cannot legitimize or downplay corruption in the case of Qatar by reference to prior corrupt practices during World Cup bids. Grand corruption was and is a deeply problematic practice, regardless of where and when it occurs. No-one is suggesting to bar countries that are known for higher levels of corruption from future World Cup bids. What is needed are stricter compliance rules and better oversight.

The Net-Zero Winter World Cup?

The decision to move the World Cup to November/December was made so that players do not have to play in the middle of the unbearable summer heat. FIFA estimates say that the World Cup will produce 3.6 million tonnes of carbon dioxide during the tournament, which is about the carbon footprint of a smaller country. By comparison, the World Cup in Russia produced 2.1 million tonnes. It is uncertain whether we can actually trust these figures. A report by Carbon Market Watch suggested that the emission figures associated with the construction of the new stadiums are vastly underestimated due to the methodology used by Qatar.

Where do the emissions come from? Contrary to popular belief, stadium air conditioning does not contribute the lion’s share of the overall emissions. Emissions mostly come from the need to build totally new infrastructure (incl. housing and ground transport) and to get fans to Qatar (which is for many fans only possible via plane). Given that the U.S. (the main competitor in the bid) already had most of this infrastructure, makes the decision to place the World Cup in Qatar seem even more strange from an environmental perspective.

Qatar has promised the “first carbon-neutral World Cup in history”. However, so far only 1.8 million tonnes of carbon have been offset, and experts have argued that the quality of the carbon credits is low, for instance due to problems associated with additionality.

The problem with net-zero mega sport events is not only the credibility of the claim. It gives the false impression that we can build huge stadiums and fly in people from all over the world, and that all of this is somehow compatible with reaching Paris-aligned climate goals.

To summarize, we have placed the World Cup into a tiny desert state that significantly and systematically harms basic human rights, that has moved the World Cup final near Christmas to avoid the extreme summer heat, and that has allegedly won the bidding process through corrupt behavior.

Importantly, only pointing the finger at Qatar may be too easy, some of the problems reflected through the World Cup are part of much bigger problems surrounding football as such, most of all its extreme dependency on money.  

I am a football fan, and I will miss the matches, but I am also a fan of human rights, environmental protection, and anti-corruption. Football is for everyone and not just for those a repressive regime deems worthy. So, I rather stay away from the matches and instead spend time playing football with my son. In the end, the World Cup in Qatar will not have a true winner, because sustainability already lost…  

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Andreas Rasche is Professor of Business in Society and Associate Dean for the Full-Time MBA Program at Copenhagen Business School. More at: www.arasche.com. 


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Centre Sessions on Paradoxes with Rikke Rønholt Albertsen

1 November 2022 by mek.msc@cbs.dk

About the Episode

In this first episode of our Business of Society Centre Sessions podcast, centre manager Sarah Netter and PhD Rikke Rønholt Albertsen talk about the PhD journey, paradoxes, tensions, and the importance to “find your tribe”.

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Environmentally Sound and Financially Rewarding? Key Findings From an Exploratory Study on the Science Based Targets Initiative (SBTi)

30 June 2022 by mek.msc@cbs.dk

The Science-Based Targets initiative aligns firms’ emission reduction targets with a net-zero emissions pathway. Firm commitment yields significant abnormal returns which are larger for firms committed to larger emission reductions and for high-emitting firms.

The IPCC’s sixth assessment established a code red for humanity and provided mounting evidence of widespread, rapid, and intensifying climate change. The Paris Agreement, ratified by over 190 states and non-state actors in 2015, formally stipulated the goals of limiting global warming to ideally 1.5°C and at a minimum well below 2°C with the aim of reducing the most catastrophic damages related to climate change onto the natural environment, human health and global financial market. The need for climate action is urgent and requires engagement from governments, individuals as well as corporate and investor participation.

Combatting climate change requires voluntary private sector engagement

Incentivizing corporations and investors to act voluntarily on climate change is critical to redirect private capital towards environmentally responsible business practices. The Science Based Targets initiative (SBTi) is becoming the global standard for firms seeking to set emission reduction targets aligned with the required global decarbonization targets established in the Paris Agreement. By encouraging voluntary corporate carbon emission reductions, the SBTi is a critical tool to reduce the private sector’s reliance on fossil fuels. 

2021 record year for new approved targets and committing firms for SBTi

Since its founding, just seven years ago, SBTi has experienced exponential growth in the number of committing firms and has mobilized firms representing more than a third of global market capitalization to reduce their carbon emissions. In 2021 the initiative took steps to increase the ambition level of firms’ emission reduction targets. When first established, firms could commit to reduce their emissions either aligned with the reduction targets of 1.5°C or 2°C. However, from summer 2022, the initiative will only be accepting the more ambitious emission reduction target, as set out in their campaign Business Ambition for 1.5°C.

Since company engagement ultimately comes down to whether committing to SBTi will drive wealth for shareholders, understanding the stock market response to firm commitment to the SBTi is essential not only for businesses looking to commit, but also for investors. To justify the integration of a climate credential such as the SBTi in investment management, it needs to be able to provide excess returns. To understand the stock market reaction to firms’ announcement of SBTi commitment, we conducted a short-horizon event study on a portfolio of 1.535 firms.

Firm commitment to the Science Based Targets initiative aligns environmentally sound practices with financial viability 

Firm commitment to the SBTi indeed yields a positive announcement abnormal return and thus speaks to the credibility of SBTi in constituting a credible signal of firm commitment to sustainable business practices. Even more encouraging is the finding that firms committed to the 1.5°C target experienced substantially higher returns, indicating a stronger positive market reaction when exhibiting a higher cost of commitment and higher target ambition level. The market evidently differentiates between ambition levels by rewarding businesses that are pledging themselves to more demanding emission reductions and a more climate-friendly business strategy. These findings are particularly relevant in light of the SBTi making the more stringent emission reduction target the new standard for all firms via their campaign Business Ambition for 1.5°C and may encourage more firms to increase their efforts in reducing their greenhouse gas emissions.

Stock price reaction in response to commitment to the Science Based Target initiative

In turn, high carbon emitting firms, proxied here by firms identified by the CA100+ list, reaped the largest reward in their stock price following commitment. This finding further confirms the market’s more sensitive reaction to costlier commitments, but also creates concern about whether the SBTi may have to rethink a recent strategic decision. The SBTi announced that they will not be accepting targets set by firms operating in the Oil and Gas industry, thus abandoning the industry specific methodology for fossil fuel firms which had been in development for several years. Fossil fuel firms have a key role to play in successfully achieving the goals of the Paris Agreement, thus begging the question of whether the SBTi is not missing out on covering an industry critical to combatting climate change and a sector of firms who are highly rewarded by the market for committing to reduce their emissions. 

As climate disasters become more prevalent and more severe, firms who fail to transition to a low, or zero, carbon business model can be expected to become more vulnerable in the long run. To expand the analysis, we further tested the performance of a portfolio strategy screened for firms committed to the SBTi. Despite the underperformance of an SBTi screened portfolio against a portfolio consisting of only non-committed firms in the medium-term, there is reason to believe that a portfolio with SBTi committed firms may provide higher returns in the future. Given that SBTi commitment represents a commitment to aligning the firm’s operations with the net-zero emissions pathway, it can be perceived as a safer bet in the long run. Moreover, portfolios consisting of SBTi firms were shown to be characterized by lower volatility. The objective of investors is shifting to increasingly sustainable and impact focused investment profiles, hence portfolio and asset managers may use SBTi commitment as a filter in security selection to achieve their client’s demand.

Looking Ahead

Financial institutions have a key role to play in driving systematic economic transformation towards a global net-zero carbon emissions economy in their power to lend and invest. As evidenced, firm commitment, ambition level and cost of commitment are reflected in the stock’s pricing mechanism, making the business case for the firm to set ambitious targets for decarbonization, and providing rationale for investors to in the short run utilize the market’s reaction to firm commitment in investment processes and strategies. 

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Milena Bär is a recent graduate in MSc Applied Economics and Finance and is working as a student researcher in ESG and Sustainable Investments at Copenhagen Business School. Her research projects are mainly within the field of ESG metrics and regulation, with a focus on the investor’s side.

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Ottilia Henningsson recently graduated with a MSc in Applied Economics and Finance from Copenhagen Business School with a keen interest in the transition towards a more sustainable financial industry. 

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Kristjan Jespersen is an Associate Professor at the Copenhagen Business School. He studies on the growing development and management of Ecosystem Services in developing countries. Within the field, Kristjan focuses his attention on the institutional legitimacy of such initiatives and the overall compensation tools used to ensure compliance.


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Corporate Social Responsibility and Societal Governance

24 June 2022 by mek.msc@cbs.dk

Russia’s invasion of the Ukraine reminds us that corporate social responsibility (CSR) is both a reflection of the times we live in and also dynamic! Numerous corporations, acting in response to social and political pressure, are withdrawing from Russia on the grounds that human rights, and a nation’s rights, are being trampled on. This is not to say that these decisions necessarily come easily: there may be ethical, strategic, stakeholder and political tensions. But the point is that perhaps the most basic societal issue of war and peace – and its governance – enters CSR agendas. Ethical investors are even considering the defense industries as suitable for their assets.

In recent decades several challenges have emerged which appear to move CSR from a relative comfort zone of discretionary activities to more core societal governance challenges, some of these manifestly involve some corporate culpability (e.g. the 2008 financial crisis, international supply chain labor abuses, climate change, ecological degradation), others like international pandemics, war and international health and welfare challenges reflected in the UN Sustainable Development Goals, may reflect wider causes. Nonetheless, corporations claim some responsibility for these issues. Even corporate ‘talk’, as well as ‘walk’, contribute to the redefinition of CSR to take in core societal governance challenges.

This is understood as right and proper from some perspectives. Medieval corporations were established precisely to achieve public ends – often of basic infrastructure. Industrial corporations were pioneers of C19th health, welfare and education systems.  In many developing countries corporations take responsibility for physical security of their employees and communities. 

But in the late C20th a view took hold that this was somehow inappropriate.  Milton Friedman’s famous 1970 critique of CSR was precisely on the grounds that corporations are not accountable for addressing such issues: governments are. Many CSR advocates, whether fearing a corporate takeover of government or vice versa, and have advocated a dichotomy between the responsibilities (social and economic) of corporations and those of governments.

Yet the last twenty years have witnessed two related phenomena which challenge the dichotomous view. First, corporations have chosen to engage in social and environmental agendas which are core for national and international governments (e.g. human rights, corruption, access to resources), whether in response to pressure or by virtue of their own ethical or strategic judgement. Secondly, governments have encouraged corporations to enjoin public efforts, through their policies of endorsement and cajoling, financial incentives, partnerships and even mandates (e.g. for energy markets, non-financial reporting, supply chain due diligence).  

Governments have recognized the distinctive resources that corporations can bring to governance questions (e.g. to innovate, to experiment, to reach beyond national boundaries, to collaborate). Interestingly in cases of mandate, governments often cede to corporations discretion as to how, rather than whether, to comply. Thus, for example, corporations can choose whether to cynically comply with international weapons sanctions on a country to sell arms by the legal use of third parties to effectively maintain the sales OR to embrace the spirit and intention of the sanctions and uniformly cease the sales to the regime in question.

But Friedman’s critique nags and critics of corporations point to unaccountable corporate power through lobbying and informal influence.  Corporations lack a traditional democratic mandate. We elect MPs and governments, but not CEOs. So is engagement with public policy (rather than legal compliance) really the business of corporations?  

My short answer is ‘yes’ on the grounds that businesses are members of society and that corporations are afforded particular privileges by the state, and thus have clear public duties. But the situation is not satisfactory.  In most democratic jurisdictions corporations’ roles ‘to make’ and ‘to take’ regulation are not clearly specified and thus their accountability is unclear.  Moreover, new international multi-stakeholder initiatives which tie corporations in with each other and with civil society often fail to effectively regulate errant organizations.  

So we have a challenge which is about CSR and politics: how to better build corporations into political institutions? I suggest that the challenge is shared – for corporations to review their political participation to ensure that it is citizenly; for civil society to engage in defining how corporations can be more accountable and to engage more directly in corporate accountability (perhaps with support from government?); and for governments to review how accountably corporations influence and respond to regulation.  

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Jeremy Moon is Professor at Copenhagen Business School, and Chair of Sustainability Governance Group. Jeremy has written widely about the rise, context, dynamics and impact of CSR.  He is particularly interested in corporations’ political roles and in the regulation of CSR and corporate sustainability.


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