CSR

My new shoes, Nike and Corporate Social Responsibility

Published on: 03 Feb 2014

My new year’s resolution was to get back into jogging. My friends never believe me but a couple of years ago I even managed a half marathon but unfortunately work and my like for food meant that the weight went on and the exercise took a back seat. On 1 January this year I made a resolution to get back to exercise. It’s nearly the end of February and the good news is that I’ve kept it up so far!

So much so in fact that I’m in need of some new running shoes. I’ve used Asics shoes for years but this evening had a quick look at the Nike site to see what was there.

Being an accountant though I couldn’t resist having a look at the site for some other information rather than just the latest products.

Back in the 1990s Nike was in the news for a number of wrong reasons. There were reports that some of their suppliers were allegedly paying their employees a pittance and some were working in sweatshop conditions. A BBC report also uncovered child labour practices at one of their suppliers in Cambodia.

Supply chain management is key to any successful business. Nike, as one of the world’s leading brands had to act fast to ensure that their brand wasn’t damaged by the bad publicity. They acted quickly and by all accounts resolved any issues that may have been present with their suppliers.

What is interesting though is that in today’s business environment the supply chain is no longer “hidden away” but is now arguably used to prove “best practice”. Nike have not only ensured compliance with best practice but have an “open book” policy on their website where you can find out comprehensive details of their CSR activities. Have a look here and there’s all you’d want to know about Nike’s CSR policies.

Now of course, I should really get off the computer, stop eating biscuits and get out there running…

Will auditors become more like Tom Cruise in the future? Well, if I was to make a prediction…

Published on: 28 Feb 2013

Gone are the days when auditors were manually checking and ticking lots of pieces of paper. Today’s auditing techniques involve significant use of computers.

But how far can this computer use go? Will they be able to predict when accounting fraud is going to take place as opposed to tracking transactions that have already occurred?

The film Minority Report starring Tom Cruise was based around software that could predict when a crime was going to happen and the culprits would be arrested before they actually committed the crime. Although this film seemed well and truly within the realms of science fiction, two police forces in the UK have recently begun trials of a sophisticated computer software package which aims to predict where and when future crimes are likely to occur.

The software is known as Crush (Criminal Reduction Utilising Statistical History) and is used to identify potential crime hotspots based on a variety of data including crime reports, offender profiles and strangely enough even weather forecasts.

Once these upcoming crime hotspots have been identified then the police can allocate resources accordingly.

The system is produced by IBM and the UK tests are based on a successful roll out of the software in the US by the Memphis police force which resulted in a reduction of serious crime by 30%.

Back to auditing though and will the next step be predicting when a fraud is likely to occur using statistical analysis based on industry, profit movements, director’s personal life and spending habits (plus the weather of course)?

Given the reliability of some computers though, one thing for sure is that is if you happen to live in a town called “Syntax Error” then you may have a surprise visit from a Tom Cruise lookalike with a briefcase and a calculator.

The enchanting fairy tale of the little frog and the Big 4 Accountants.

Published on: 11 Mar 2011

A few years ago I was lucky enough to visit Tanzania. It’s a beautiful country with some amazing sights and fantastic wildlife.

Little did I know though that had I visited Tanzania recently I could have been fortunate and quite possibly have seen a frog named after some accountants.

Now I don’t mean “Fiona the Financial Controller” or “Andrew the Auditor”.

No, I mean a new frog that goes by the rather glorious if tricky to spell name of “nectophyrnoides deloittei”.

The “nectophyrnoides deloittei” species, or “the Deloitte Frog” as I’ll refer to her if we ever meet, was first identified back in 2005 but remained officially nameless until it was recently named after the Big 4 company Deloitte in recognition of their support for rainforest conservation work.

The firm has raised over £200,000 in the last year to help preserve the Rubeho Forest in Tanzania.

Heather Hancock, Managing Partner for Innovation and Brand at Deloitte, said “We wanted to demonstrate our commitment to the rainforest, to biodiversity and to the development needs of local people. And we wanted to learn more about how we could make a difference in remote and important parts of the world.”

All in all a very honourable project by Deloitte and congratulations to all those involved.

Advertising on the move and all for a good cause.

Published on: 12 Jan 2011

There are certain things in this world that really should be readily available no matter where you live.

School education for children for example is one such item.

In some countries however it is a sad fact of life that children often have to walk many kilometres to their nearest school. This can understandably result in there being challenges in ensuring attendance at classes.

The advertising industry can be a very creative place and in Africa the  advertising industry is currently growing at an estimated 20% per annum.

French company Instinct’s Socially Intelligent Marketing programme aims to combine this growing advertising market in Ghana with providing a solution to the school transport problem.

Instinct has launched “TriKademiK”.

In effect this is a mobile advertising platform that combines a billboard with a tricycle that can carry up to 6 children to school. When not in use on the school-run the tricycle can be converted to transport other goods for the local community.

The initial pilot versions of TriKademiK were sponsored by mobile phone company Zain Ghana and drinks company Voltic (part of the SAB Miller group of companies).

Instinct’s aim is to roll out the programme to over 1,000 tricycles which can transport 7,000 children to school on a daily basis.

All in all an impressive and creative use of an advertising platform for a very good cause.

Get out your sketch pad if you want to overcome a barrier…

Published on: 11 Oct 2010

If an organisation can create a successful barrier to entry then it will have a great competitive advantage.

In simple terms, a barrier to entry can prevent competitors entering the market.

We’ve blogged before about a good example of a barrier in the Indian telecommunication market but a recent attempt to create a barrier by Southampton Football Club in the UK was met by a truly artistic response.

Southampton FC decided that they would try to boost their income by preventing any non Southampton FC photographers from taking photos of their match with Plymouth Argyle.

This barrier meant that the only photographers present were official Southampton FC photographers and hence any photos of the match would have to be purchased from the official agency. A nice revenue source for the club.

Ignoring the rights and wrongs of this in terms of impact on other clubs and setting a precedent, this is indeed a pretty tough barrier to overcome.

Understandably upset at having to pay for photos of their local team, the Plymouth Herald newspaper approached well known local artist Chris Robinson.

Chris watched the match on television and then drew “comic strip style” pictures of the football action which were then published in the paper instead of photos.

As you can see, the results were pretty impressive.

It also resulted in a pretty unusual answer to the question of “How do you overcome a barrier to entry”.

The answer now includes, “Draw some cartoons”.

“There’s no such thing as a free lunch” but will there be such a thing as a free drink or cheap drink in the future?

Published on: 30 Aug 2010

Binge drinking in the UK is a major problem. City centres at the weekend can be full of people that are literally trying to drink as much as possible in as short a period of time. Violence and health issues often ensue.

As well as the disturbances to local residents there are also the costs both health-wise to the drinkers and financially to police forces, hospitals and society at large arising as a result of this binge drinking.

As a potential solution to this problem, the government is currently investigating whether to ban free or cheap drink promotions. One of the ideas being discussed is whether to make it illegal to sell alcohol below cost price. In other words to prevent businesses offering “loss leaders” on drinks so as to encourage higher spending at a later date.

If you’re an accountant, and assuming you’re not reading this in the middle of an actual binge drinking session yourself, this raises an interesting discussion on what exactly is meant by “below cost” and in particular the term “cost”.

The major alcoholic drinks manufacturers produce a range of drinks. Diageo for example produce drinks as varied as Smirnoff vodka, Johnnie Walker whisky and the famous Irish stout Guinness.

Identifying the cost of each particular drink would be challenging exercise. Whilst they no doubt have sophisticated management accounts which allocate overheads and indirect costs in certain ways, there would be a clear debate as to which was the “correct” allocation of these costs.

Apportioning overheads such as head office costs, R&D and marketing to individual products would result in a certain amount of flexibility in terms of identifying the cost figure to use for “below cost” purposes.

One solution to this inherent problem of identifying the cost of individual products has been proposed and that is setting the minimum cost of the drinks as equivalent to the duty and VAT that needs to be paid on the particular drinks.

So, the next time you’re out having a quiet drink with some non finance friends feel free to start a discussion about how much each of your drinks cost to make. You can then explain about the various possible methods of allocating indirect costs. Then again, talking about management accounting cost allocation whilst out with your friends may result in your  non finance friends starting a binge drinking session themselves…

Things are getting more expensive in China but is this good news for McDonalds?

Published on: 20 Aug 2010

A report issued by Credit Suisse this week highlighted the fact that costs of manufacturing in China are on the increase.

Average salaries for example have increased from $1,000 per annum in 2000 to nearly $4,000 in 2010. This increase, together with the cost of transporting goods to Europe and America, means that the cost base has increased significantly and importantly is likely to continue to increase.

A number of companies have invested in China principally on the basis of their low cost base.  The rising cost base though is causing concern for a number of companies.

Will they be able to switch production to other low cost locations such as Bangladesh or Vietnam? They probably will be able to but it could be costly.

Will they be able to pass on these cost increases to the end consumer by way of price increases? Given that we are only just starting to come out of recession my guess is that this will be challenging to say the least.

But does all of this really come as a surprise? With the explosion of globalisation over the last couple of decades and companies manufacturing in cheaper location or “off shoring” services then surely it’s simply a case of supply and demand.

If companies set up offshore operations in a certain territory which is renowned for having, for example, good quality cheap IT skills then when other companies join them there will be a surge in demand for these individuals and wages will increase.

It will take a number of years or even generations but some people’s view is that eventually there will be very similar wage levels wherever you are in the world.

Back to the increase in wages in China though and whilst this will be bad news for a number of companies there will also be companies that will benefit from the increase in local spending power. McDonalds for example are no doubt licking their lips in anticipation at all the Big Macs that could well be sold in China in the near future.

Is this the real Willy Wonka? After all he bought enough chocolate on Friday to make over 5 billion bars of chocolate.

Published on: 19 Jul 2010

Anthony Ward, a British financier who set up hedge fund Armajaro Holdings, bought a huge chunk of chocolate on Friday.

To be precise, he spent over £650 million buying 241,000 tonnes of cocoa beans.

This was the highest single purchase of cocoa for nearly 15 years and happened as cocoa bean prices rose to their highest level for 23 years. On news of the purchase cocoa futures for July delivery jumped by 1.5%.

The trade took place on Liffe (the London International Financial Futures and Options Exchange), a market which trades contracts in commodities such as sugar, coffee and cocoa.

As well as the sheer size of the transaction the strange thing about it was that Mr. Ward’s company has actually taken delivery of the cocoa. This is very unusual as the vast majority of cocoa transactions normally involve traders exchanging option or futures contracts without actually taking possession of the beans.

So why has he purchased so much chocolate?

He’s a very astute and wealthy businessman who reportedly lives in a £10 million house in Mayfair, London.

The speculation is that he is stockpiling huge volumes of cocoa in order to be in a strong negotiating position. Harvests in the cocoa heartlands of Ghana and Ivory Coast have recently been weak and there is an increase in demand for chocolate in the Chinese and Indian markets.

It looks like chocolate prices are on the rise so what better excuse for me to stock up on some chocolate before the price rises. Somehow though I don’t think my stockpile will be anywhere near Mr. Wards…

So, how would you feel? Re-assured or spied upon? It’s a good ethical question.

Published on: 07 Apr 2010

We mentioned in a previous blog about Nike publicising their CSR (Corporate Social Responsibility) policies on their website.

Asda, Britain’s second biggest supermarket chain has gone one step further in being transparent with regard to their CSR policies.

In the past they have been criticized by some campaigners for the low wages and poor conditions that were present at some of their clothes manufacturing locations in Bangladesh. Their company website states that as part of their efforts to increase transparency it has now put in webcams at two if its clothing factories in Bangladesh.

This should help reassure customers that they are treating their suppliers ethically and are not employing them under “sweatshop conditions”. The webcam shows clothes being made and you can clearly see the conditions that are present.

The supermarket chain has said that it has also installed webcams at its head office and at an automated cow milking machine at one of their suppliers.

Press reports however have indicated that not everyone is happy with the webcams with some people arguing that it is a case of spying on the workers as opposed to proving how ethical and transparent the company is. Either way, it’s certainly a novel way to utilise technology.

I guess the question we should be asking ourselves though is how would we feel if we had a webcam looking at us at our workplace – would we feel reassured or spied upon?

The ExP Group