An increasing number of companies are using the E-liability carbon-accounting method as an important tool for tracking progress toward reducing global emissions in their supply chains. The system does not require formal accounting for downstream emissions-those occurring after a company sells its products to immediate customers, for several good reasons. Certain companies, however, are accountable for disclosing downstream emissions generated by consumers' use of their products. Three principles govern accountability: (1) Downstream accountability is limited to companies whose products are directly used by end customers. (2) Accountability for B2C companies is limited to cases where a reasonable causal link exists between product-design decisions and the downstream emissions generated by consumers. (3) Companies are accountable for disclosing emissions produced per unit of use, not for total emissions. This article presents the principles and explains how and to what standards of reliability the companies should disclose downstream emissions.
Markets for carbon trading function poorly, and many traded offsets do not actually perform as promised. Without robust protocols for monitoring offsets and in the absence of proper accounting mechanisms, market-based approaches to reducing atmospheric GHG will be vulnerable to misrepresentation and fraud. This article presents an accounting framework based on five core principles. The first two define what can and cannot be counted as an offset and what may or may not be traded. The remaining principles set out basic accounting guidelines for offsets. Together they provide the foundation for a well-functioning market that accelerates innovation and deployment of improved offsetting technologies, leading to atmospheric decarbonization.
Corporations are facing growing pressure--from investors, advocacy groups, politicians, and even business leaders themselves--to reduce greenhouse gas (GHG) emissions from their operations and their supply and distribution chains. About 90% of the companies in the S&P 500 now issue some form of environmental, social, and governance report, almost always including an estimate of the company's GHG emissions. The authors describe these as "catchall reports that are often made up of inaccurate, unverifiable, and contradictory data." They propose a remedy: the E-liability accounting system, whereby emissions are measured using a combination of chemistry and engineering, and principles of cost accounting are applied to assign the emissions to individual outputs. The authors provide a detailed method for assigning E-liabilities across an entire value chain, using the example of a car-door manufacturer whose furthest-removed supplier is a mining company, which transfers its products to a shipping company, which transports them to a steel company, and so on until the car reaches the end customer.
Fifty years ago Milton Friedman famously argued that the social responsibility of business is to increase its profits, which today are at record highs. And, as public institutions falter, business is now offering to step into the void. We must resist this (further) intrusion of business into the public sphere, as it will further depreciate civic institutions. The business of business is business, and so it should be. Business' track record in public politics has been to engineer the rules of the game to its own advantage.
A Swedish newspaper reveals that IKEA has erased all images of women from its catalog for Saudi Arabia. The article sparks criticism of IKEA from the Swedish government and its customers in the West. Critics contend that IKEA is not living up to its own commitments to gender equality. Some threaten a boycott. IKEA must respond. Reissuing the catalog with women included risks running afoul of Saudi censors who can impose harsh penalties. The company has had a presence in Saudi Arabia for nearly 30 years.
Supplement to case 116015. A Swedish newspaper reveals that IKEA has erased all images of women from its catalog for Saudi Arabia. The article sparks criticism of IKEA from the Swedish government and its customers in the West. Critics content that IKEA is not living up to its own commitments to gender equality. Some threaten a boycott. IKEA must respond. Reissuing the catalog with women included risks running afoul of Saudi censors who can impose harsh penalties. The company has had a presence in Saudi Arabia for nearly 30 years.
Supplement to case 116015. A Swedish newspaper reveals that IKEA has erased all images of women from its catalog for Saudi Arabia. The article sparks criticism of IKEA from the Swedish government and its customers in the West. Critics content that IKEA is not living up to its own commitments to gender equality. Some threaten a boycott. IKEA must respond. Reissuing the catalog with women included risks running afoul of Saudi censors who can impose harsh penalties. The company has had a presence in Saudi Arabia for nearly 30 years.
"Thin political markets" are the processes through which some of the most complex and critical institutions of our capitalist system are determined-e.g., our accounting-standards infrastructure. In thin political markets, corporate managers are largely unopposed-because of their own expertise and the general public's low awareness of the issues. This enables managers to structure the "rules of the game" in self-serving ways. The result is a structural flaw in the determination of critical institutions of our capitalist system, which, if ignored, can undermine the legitimacy of the system. This article provides some ideas on how to fix the problem.
Cameron Trebbi is a senior executive overseeing accounting policy at a large global auditing firm. His role is to lobby the firm's position with various accounting rule-making bodies worldwide. The firm is close to acquiring as new audit clients a consortium of Chinese state-owned enterprises. The consortium has asked Trebbi's firm to seek an exception for state-owned enterprises on a proposed accounting rule. But Trebbi thinks such an exception is unsound accounting policy. He must decide how he will lobby, knowing that his testimony is highly valued by the accounting rule-making body and is likely to be unchallenged.
Peninsula Industries' U.S. country manager, Peter Lee, has a problem-his star hire, Dylan Pierce, is threatening to quit. Peninsula is a large Korean conglomerate multinational that has been keen to attract foreigners. Dylan was hired by Peter to work in Peninsula's U.S. operations. After 18 months, Dylan was promoted to company HQ in Seoul, to work with Peter's former boss. Dylan, who is gay and who thrived at Peninsula's California office, quickly runs afoul of the conservative culture at Peninsula's Korean HQ. Dylan's boss in Korea tells him he needs to be less "girly" if he wants to succeed at the company. Angered, humiliated, and confused, Dylan tells Peter he's ready to quit. Peter must respond.
Erin Jones' ridesharing startup in her mid-sized hometown is finally picking up. She's hoping to reach a sustainable scale so that she can sell to a large player such as Uber in a year. But suddenly, she hits political roadblocks - the local Democratic mayor, facing a tough reelection and urged by the local taxi association - calls for more regulation of her business. Erin's board urges her to actively back the opposition Republican candidate through direct PAC giving, a Super PAC, and indirect lobbying. Erin, a lifelong Democrat, is opposed to the Republican on a number of personal issues. She must decide whether and how to engage in this election.
Societies face many pressing challenges with serious implications for business leaders. These include pollution and climate change, poverty and income inequality, obesity and public health, and corruption and regulatory capture. This note presents a way of analyzing the economic, legal, and ethical implications of these challenges for business leaders, in their capacities as corporate fiduciaries and citizens. The note offers a unifying framework by organizing major contemporary societal challenges into four "tragedies of the commons" and by developing the notion of a "capitalist's contract" that can help students consider how they, as future business leaders, will respond to these tragedies.
Tapestry Networks assembled industry leaders and their regulators in small, private meetings to build new frameworks for pressing regulatory challenges. Tapestry's motivating principle was to reimagine solutions to complex problems (e.g., drug-approval standards) in ways that created a win-win for firms and society. Tapestry meetings on bank-governance standards-initiated after the 2008-2009 Financial Crisis-had experienced some success in rebuilding trust between regulators and banks. But, five years on, the initiative faced important challenges. First, as the urgency of the Financial Crisis faded, it was becoming more difficult to show concrete successes, particularly to the meetings' sponsors-one participant described Tapestry as "sculpting fog." Second, participants differed on what they wanted to get out of the meetings-with some participants less focused on the meetings' broader social objectives. Third, Tapestry faced lingering questions about the meetings' legitimacy and whether they facilitated greater "coziness" between regulators and the regulated.