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By Maria O. Pinochet, Ethical Markets Research Advisory Board

According to advertising professionals, the declining attention span of audiences is a key factor in changes to recent advertising messages. The length of a person’s attention span depends on what a person is focused on and on what their level of interest is in a certain topic. Therefore, the normal period of focused attention fluctuates somewhere between seconds and minutes. In fact, studies, polls and data-gathering agencies report a downward trend for all types of attention spans – whether the activity is listening to a lecture, viewing a slide presentation, reading (this article!) or Web browsing.

With these declining attention spans, and in an effort to maintain the effectiveness of the advertising, many advertisers have chosen to create messages that appeal to simple human emotions such as fear and greed. They argue that, by sheer time constraint, advertising cannot develop a strong cognitive/rational argument and must, instead, present a “slice of life”; therefore, the message cannot be anything but an unbalanced representation.

Indeed, many companies take a bite of the green “slice of life,” but their green messaging turns out to be little more than a “sound bite” for consumer consumption. In such cases, a company’s public relations department has most likely crafted the green messaging in an effort to align with positive consumer opinions about how important it is for companies to behave in a socially responsive way, not only within the ecosystem that sustains their product and service but also toward the communities they serve.

However, upon further inquiry, one often finds no company involvement in green initiatives beyond the public relations as demonstrated by the number of sustainability officers emerging from marketing departments. Again, in such cases, the green “sound bite” is indeed just a “slice of life,” a green washing that has no more value than the delivery of its feel-good message.

When emotional appeal is used in advertising, it is much too easy for audiences with different value orientations to perceive messages as more or less skewed or unethical.  When that happens, advertising messages may become subject to a higher level of controversy and may even be considered a misrepresentation of stakeholder interest.

Some feel that this reliance on primal emotions has made advertising, in general, unethical. They say such messages have no transparency, lack depth and clarity and are thus completely disassociated from the brand, product and service values.  Nowhere is this more apparent or more disputed than in the new practice of neuromarketing, where technologies such as MRIs attempt to identify triggers to bypass a brain’s evaluation process and go straight to its decision-making centers. Ethical Markets Media and the World Business Academy believe  neuromarketing’s deliberate attempt to influence buyers in a manner that inhibits their evaluation processes is manipulative and unethical.  They have a petition which anyone can sign to have this practice stopped.

There is guidance and reward for companies that have as their core value to better inform buyers and to serve all stakeholders. The EthicMark®, one of the highest honors in advertising, recognizes companies that contribute positively to the advertising community with their inspirational messaging. Founded by Hazel Henderson of Ethical Markets Media, the EthicMark® is awarded by the World Business Academy for advertising “that uplifts the human spirit and society.”

Organizations like Ethical Markets Media, the World Business Academy and SRI in the Rockies (where EthicMark® winners are announced) are raising awareness about the positive contributions of ethical advertising.  What are you and your organization doing to raise the bar and write the next chapter in the history of advertising?

Readers: What’s your take on neuromarketing – and ethical marketing? Share your ideas on Talkback!

Note: This article has appeared on CSRwire

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By Wayne Visser

As part of the Quest for CSR 2.0 series

By May 2008, it was clear to me the evolutionary concept of Web 2.0 held many lessons for corporate social responsibility. At the time, I declared: “The field of what is variously known as CSR, sustainability, corporate citizenship and business ethics is ushering in a new era in the relationship between business and society. Simply put, we are shifting from the old concept of CSR – the classic notion of ‘Corporate Social Responsibility,’ which I call CSR 1.0 – to a new, integrated conception – CSR 2.0, which can be more accurately labelled ‘Corporate Sustainability and Responsibility.’”

The allusion to Web 1.0 and Web 2.0 is no coincidence. The transformation of the Internet through the emergence of social media networks, user-generated content and open source approaches is a fitting metaphor for the changes business is experiencing as it begins to redefine its role in society. Let’s look at some of the similarities.

Web 1.0

  • A flat world just beginning to connect itself and finding a new medium to push out information and plug advertising.
  • Saw the rise to prominence of innovators like Netscape, but these were quickly out-muscled by giants like Microsoft with its Internet Explorer.
  • Focused largely on the standardised hardware and software of the PC as its delivery platform, rather than multi-level applications.

CSR 1.0

  • A vehicle for companies to establish relationships with communities, channel philanthropic contributions and manage their image.
  • Included many start-up pioneers like Traidcraft, but has ultimately turned into a product for large multinationals like Wal-Mart.
  • Travelled down the road of “one size fits all” standardization, through codes, standards and guidelines to shape its offering.

Web 2.0

  • Being defined by watchwords like “collective intelligence,” “collaborative networks” and “user participation.”
  • Tools include social media, knowledge syndication and beta testing.
  • Is as much a state of being as a technical advance – it is a new philosophy or way of seeing the world differently.

CSR 2.0

  • Being defined by “global commons,” “innovative partnerships” and “stakeholder involvement.”

    From netasbitsandpieces.blogspot.com

  • Mechanisms include diverse stakeholder panels, real-time transparent reporting and new-wave social entrepreneurship.
  • Is recognising a shift in power from centralised to decentralised; a change in scale from few and big to many and small; and a change in application from single and exclusive to multiple and shared.

So what will some of these shifts look like? In my view, the shifts will happen at two levels. At a macro-level, there will be a change in CSR’s ontological assumptions or ways of seeing the world. At a micro-level, there will be a change in CSR’s methodological practices or ways of being in the world.

Macro Shifts

The macro-level changes can be described as follows: Paternalistic relationships between companies and the community based on philanthropy will give way to more equal partnerships. Defensive, minimalist responses to social and environmental issues are replaced with proactive strategies and investment in growing responsibility markets, such as clean technology. Reputation-conscious public-relations approaches to CSR are no longer credible and so companies are judged on actual social, environmental and ethical performance (are things getting better on the ground in absolute, cumulative terms?).

Although CSR specialists still have a role to play, each dimension of CSR 2.0 performance is embedded and integrated into the core operations of companies. Standardized approaches remain useful as guides to consensus, but CSR finds diversified expression and implementation at very local levels. CSR solutions, including responsible products and services, go from niche ‘nice-to-haves’ to mass-market ‘must-haves.’ And the whole concept of CSR loses its Western conceptual and operational dominance, giving way to a more culturally diverse and internationally applied concept.

Micro Shifts

How might these shifting principles manifest as CSR practices? Supporting these meta-level changes, the anticipated micro-level changes can be described as follows: CSR will no longer manifest as luxury products and services (as with current green and fair-trade options), but as affordable solutions for those who most need quality of life improvements. Investment in self-sustaining social enterprises will be favored over cheque-book charity. CSR indexes, which rank the same large companies over and over (often revealing contradictions between indexes) will make way for CSR rating systems, which turn social, environmental, ethical and economic performance into corporate scores (A+, B-, etc., not dissimilar to credit ratings), which analysts and others can usefully employ to compare and integrate into their decision making.

Reliance on CSR departments will disappear or disperse, as performance across responsibility and sustainability dimensions are increasingly built into corporate performance appraisal and market incentive systems. Self-selecting ethical consumers will become irrelevant, as CSR 2.0 companies begin to choice-edit; i.e., cease offering implicitly ‘less ethical’ product ranges, thus allowing guilt-free shopping.

Post-use liability for products will become obsolete, as the service-lease and take-back economy goes mainstream. Annual CSR reporting will be replaced by online, real-time CSR performance data flows. Feeding into these live communications will be Web 2.0 connected social networks, instead of periodic meetings of rather cumbersome stakeholder panels. And typical CSR 1.0 management systems standards like ISO 14001 will be less credible than new performance standards, such as those emerging in climate change that set absolute limits and thresholds.

As our world becomes more connected and global challenges like climate change and poverty loom ever larger, businesses that still practice CSR 1.0 will (like their Web 1.0 counterparts) be rapidly left behind. Highly conscientised and networked stakeholders will expose them and gradually withdraw their social licence to operate. By contrast, companies that embrace the CSR 2.0 era will be those that collaboratively find innovative ways tackle our global challenges and be rewarded in the marketplace as a result.

Note: This article has appeared on CSRwire

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by Woody Tasch

First, let’s admire this fist:

 

The Economist put this on its cover earlier this year to celebrate the Arab Spring.

Let’s use it, today, for the Occupy Wall Street movement.

People raising their fists, peacefully, against “greed is good,” against wildly inequitable distribution of wealth, against fortunes made on derivatives and bail outs and what Warren Buffett called “financial weapons of mass destruction.” Fists raised against fast money–you know, the stuff of 1,000 pt. drops in the Dow in 20 minutes and Goldman Sachs bonuses “trimmed to $16 billion.”

People raising their fists not against tyrants and political oppression, but against distant bankers and invisible investments, going who knows where on the planet and doing who knows what to who knows who in the ever-accelerating pursuit of maximum financial speed—more, bigger, faster, and unlimited gains for them with their hands on the levers.

I see your fists and raise you a tent. A tent?

Not just any tent. This tent:

In this tent on a farm field in Vermont last year, 600 of us from more than 30 states and several foreign countries gathered and committed $4 million to 12 small food entrepreneurs from around the country who are creating jobs, getting toxics out of the food chain, restoring soil fertility, preserving ground water, keeping carbon in the soil and out of the atmosphere, fighting diabetes and otherwise striking at some of the root problems—literally and metaphorically—or our economy and our culture. Showing the way towards life after fast food and fast money.

This is the tent of Slow Money.

In it, we are beginning to put some of our money to work as far from Wall Street as far can be… that is, near where we live, in things that we understand, things that bring tangible, immediate benefits to our communities.

We are starting with small food enterprises, which bring fertility to the soil of the economy: small organic farms, grain mills, creameries, local slaughterhouses, seed companies, compost companies, restaurants that source locally, butchers and bakers and, sure, a bee’s-wax candle maker or two, food hubs, community kitchens, community markets, school gardens, niche organic brands, makers of sustainable agricultural inputs, and more.

Could this be the beginning of a new kind of investing, something as powerful, in its own right, as protest? As powerful as conscientious objecting? Can we call it conscientious investing?

We invite some of you to take a break, let your arms down and give your fists a rest for a moment, and join us.

Our goal: one million Americans investing 1% of their money in local food systems, within a decade. We think this is the path towards an economy that is healthier, fairer, more balanced, more sustainable.

We are still small, but sprouting. 20,000 people have signed the Slow Money Principles. 2,400 have joined the Slow Money Alliance, a national network and emerging group of eleven local chapters that are facilitating the flow of millions of dollars into scores of small food enterprises around the country. The 2011 national gathering held in San Francisco this Autumn took another step towards this goal of one million Americans investing 1% in local food systems. We featured 30 new entrepreneurs, all currently seeking capital.

Can we design new systems appropriate to the realities of investing in the 21st century? By starting with direct relationships we bypass the intermediation that is taken to an extreme in modern finance. Each individual’s action to take 1% of their money and invest it in these entrepreneurs is paving the path towards a new economy, one based less on extraction and consumption and more on preservation and restoration.

While we use the 99%er side of our brain to protest against the bad 1%, let’s also use the Slow Money side of our brain, and our heart, to roll our sleeves up and begin investing a good 1%.

And maybe, just maybe, we’ll find our way to life after fast money.

Woody Tasch is Chairman of Slow Money, a national 501(c)(3) organization formed to catalyze investment in local food systems. Tasch is author of Inquiries into the Nature of Slow Money: Investing as if Food, Farms and Fertility Mattered. To get involved, start by signing the Slow Money Principles at: http://slowmoney.org/principles

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By Namrita Kapur

Here’s a quick pop quiz to test your knowledge on financing energy efficiency. True or False:

1. Energy efficiency financing provides risk-adjusted returns in the mid-to-high “teens.”

Answer: True

2. Energy efficiency is the hot, new asset class with massive amounts of investment capital catalyzing upgrades in building stocks and industrial facilities across the country to realize significant greenhouse gas reductions in the near-term.

Answer: False

As crazy as it may seem, this paradox exists today.  The Conference Board and McKinsey & Co. predict that energy efficiency is a $170 billion per year investment opportunity that can provide an average 17 percent rate of return. At Environmental Defense Fund(EDF) we’ve demonstrated the potential return through our work with leading business partners.  Our EDF Climate Corps program has identified investments to date that can create a whopping $439 million of savings in net operating costs. Another example – our work with Kohlberg Kravis Roberts & Co. (KKR) has yielded over $160 million in energy efficiency savings across seven of KKR’s portfolio companies since the Green Portfolio Program began in 2008. Despite all of the promising research and results, we are currently seeing only a fraction of investment capital needed to realize these benefits.

Investing in energy efficiency is important to our goals at EDF to clean up the air we breathe and stabilize our climate, and we set out to better understand how we can catalyze this marketplace.  We reviewed the literature; spoke with investors from firms Sustainable Development Capital LLP, Hudson Clean Energy Partners and GE Capital; and captured lessons learned from our work with leading business partners like KKR and programs like EDF Climate Corps.  We’ve consolidated the results of our research into a new report, “Show Me the Money: Energy Efficiency Financing Opportunities and Barriers,” which explores how organizations can overcome the challenges to energy efficiency financing and maximize the opportunities that are available for business and our planet.  We hope you will utilize the research we’ve collected and join  us in stimulating this marketplace.  Heck, we would be happy even if you by-passed us altogether and went straight to taking advantage of this lucrative asset class.

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by Fabrice Grinda

As I was reading The Upside of IrrationalityDan Ariely’s sequel to the brilliant Predictably Irrational, I started wondering whether there were macro implications and applications for behavioral economics and specifically to the concept of hedonic adaptation.

As I described over the years in my musings on happiness, hedonic adaptation is the process by which we rapidly adapt to changes in our life circumstances and return to our mean level of happiness. Because we disregard its existence, we humans are particularly bad at predicting how positive and negative changes in our lives will affect our happiness. People in Michigan predict that people in California will be happier than they are given the weather. Empirical evidence suggests that a move to more clement weather does temporarily improve people’s happiness, but their happiness level rapidly reverts to the mean as they get used to the gorgeous weather. Likewise, when asked to predict how they would react in the face of negative events such as losing the ability to use their legs, people underestimate their ability to cope. They predict they would be miserable forever while research suggests that after an initial dip in happiness, people rapidly revert to their mean level of happiness.

Behavioral economics suggests ways to delay or speed up our adaptation. If you are considering indulging yourself by buying a new wardrobe and plasma TV for instance you are better off spacing the purchases. Likewise, if you are receiving a massage, you are actually better off interrupting it for a few minutes in the middle.

The reverse applies to negative changes in your life, especially economic cutbacks. People intuit that they should spread the pain, but research suggests that are much better off reducing consumption all at one. In other words, you should move to a smaller apartment, give up cable television and cut back on expensive coffee all at once rather than in increments. The initial amount of pain will be higher, but as we rapidly adapt to our circumstances, the total amount of agony will be lower.

It strikes me that our society and politicians have been making the wrong choices over the last few years in terms of economic policies as we seem unable to take a bit more pain in the near term and thus end up enduring pain for much longer than we might otherwise have to. It was not always the case. In 1981, when Paul Volcker increased the Feds Funds Rate to up to 20% in June 1981, he plunged the US in a deep recession increasing the unemployment rate from 5.8% in 1979 to 9.7% in 1982. However he tamed inflation which peaked at 13.5% in 1981. By 1983, inflation was lowered to 3.2% and the stage had been set for a period of sustainable growth.

More recently though we have artificially propped up many sectors of the economy through bailouts, subsidies and policies which delay those markets reaching equilibrium. We thus create an impression of continued economic malaise as these markets slowly reach equilibrium. In other words, we have longer lower level pain instead of more pain for a shorter period of time.

Even assuming that the total amount of pain is the same in the case where we let markets clear on their own versus propping them up and it’s just the intensity and duration that changes (and I suspect that it’s not), we are clearly making the wrong choice. The continual arrival of bad news prevents us from adapting to our circumstances and we are thus suffering much more than we would otherwise if we had experienced the entire negative outcome in a brief period of time. Moreover, I suspect that continued arrival of negative or mixed economic news is detrimental to society at large and not just for those who have lost their jobs and/or home as the economic uncertainty makes them fear for their own well-being. In other words it’s better to have brief deeper recession than 20 years of Japan like stagnation.

This is not to say we should not act when the economy is in recession. Running counter cyclical fiscal and monetary policy has proven effective time and time again. The issue has more to do with policies that prop up real estate, car manufacturers, and banks, and delay the inevitable reform of public pensions and our overall fiscal adjustment. Despite the potential for moral hazard, you actually can’t let your financial sector go out of business because it is the engine of credit creation without which you don’t have an economy. My concern is less with the need to bailout banks (unfortunately we had to), but the fact that we did not do a good job at cleaning their balance sheets. Instead of disposing of most of their toxic assets with a good bank / bad bank approach (or a number of approaches with the same outcome), we are hoping to let them earn their way out of the problem by keeping short term interest rates low (banks make a lot of money in low rate environments because their borrowing decrease which increases the spread with the rate they earn on the long term loans they made). The result is not dissimilar to the zombie bank problem that infected Japan for the last twenty years. It took twenty years for these banks to clean their balance sheets and start lending again. Credit creation remains broken in the US and might worsen if housing takes a turn for the worse, which it very well might as we don’t seem to have reached the market clearing equilibrium as suggested by continuing price decreases.

 

Likewise, the entire slew of policies enacted to stem the decrease in housing prices have merely delayed many foreclosures, price decreases and decreased labor mobility as people have stayed in their home longer than they should in the hope of a price recovery. Instead of seeing a rapid adjustment to the market clearing price and acting accordingly, homeowners are enduring agonizing small decreases in prices year after year. Again, in this, we seem to be copying the Japanese example where house prices fell a few percent a year every year for 18 years from 1989 to 2007. In the end residential real estate prices fell over 90% in Tokyo between 1989 and 2007 and commercial real estate fell over 99% in some cases!

As our politicians and public unions face fiscal retrenchment, they should really focus on decreasing human misery by making more cuts and adjustments upfront rather than spreading them little by little over many years.

Hedonic adaptation is one of the most powerful tools at our disposal for stemming human misery. Let’s make the most of it!

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