CSR and Partnerships

partnership agreement

partnership agreement (Photo credit: o5com)

One of the more resent developments within the field of CSR has been the emergence of strategic partnerships. Ever since the start of business there have been different forms of partnerships from small business franchises to large-scale outsourcing. In the last decade there have been an emergence of other forms of partnerships such as business and governmental institutions and in the last few years between Business and NGOs. While the first form of partnership is relative unproblematic as it is assumed that both parties have similar end goals in their efforts to maximize return on investment it is another case for the two last forms of partnership.

Business and Governmental partnerships have been seen in areas were both parties could see synergies. This could be in cases were companies wanted to explore markets in developing countries but needed support in-order to get a foothold in the market. In both Sweden and Denmark business partnerships are promoted by governmental development agencies like SIDA Business-4-Devlopment and DANIDA Business-2-Business programs (SIDA, 2012, DANIDA, 2012).

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Vestas is moving dangerously close to the edge

The crisis in Vestas is now so deep that the group existing only because of their banks want the too. According to a local Danish newspaper Jyllandsposten has Vestas has signed an agreement with banks to ensure that the company has enough money to continue operations. Otherwise they would have to close down operation.

The information has been disclosed in an interim financial statement for the second quarter of 2012.Which follows several years of poor financial performance and inability to change its strategy when the financial crisis hit in 2008.

The situation is now that Vestas has been unable to live up to the loan agreements made with its bank connections a significant step down from just a few years ago when the company was one of the fastest growing companies in Denmark.

Danger in the horizon

“Despite this, financial covenants testing is affected by the disappointing results realised by Vestas in the second half year of 2011 and the first quarter of 2012, which mainly related to the cost overruns in relation to the introduction of new technology” says the statement from Vestas to add: “Vestas has therefore agreed with its lenders to defer the half-year 2012 testing of the financial covenants contained in Vestas’ banking facilities and the lenders have allowed drawings, which in the opinion of Vestas are sufficient for the continued operation of Vestas on usual terms since the company expects to test on normal terms in the future.

According to Frank Jensen from the Danish Stock Analysis information that Jyllandsposten talked to is;

“The fact that banks are easing the requirements shows that the Vestas simply can not live up to them. There is only one explanation, and it is that they do not get the money in the Treasury, as required,” said Frank Jensen epn.dk.

This should be seen in the light that Vestas lost 338 million. euro in the first quarter and during the first two quarters the total is now nearing a total of 633 million euros.

Deficit of despite good figures for renevue

Revenue increased to 1.6 million. Euro. and is increase from 931 million. euros from the same quarter last year. However, the increased revenue is not impressive in the light that it bottom line showed a deficit of 8 million. euros after tax, compared with a profit of 55 million. euro in the second quarter of 2011.

Vestas considers this to be a temporary issue and in the light of the company’s positive results in the second quarter of 2012 combined with the large backlog of firm and unconditional orders, Vestas expects to meet the financial covenants contained in its current banking facilities in the near-term future.

With this in mind it becomes increasingly difficult to believe that Vestas will be able to live up to its financial commitment even after massive layoffs and changes on board level.

Institutional investors will put 60 billion into Danish Infrastructure

The Öresund Bridge from underneath

The Öresund Bridge from underneath (Photo credit: Wikipedia)

It is quite amazing to see and hear what Institutional investors are communicating at the moment. For a long time it was their job to create more wealth for the people who had trusted their hard earned money into a few very well of funds. They invested freely in all kinds of projects and had portfolios that were very diversified (and some would say to diversified).

The first came the raise of the consumer activist who forced these huge investors to put in ethical screens that ensured that there was some form of consistency between the individual wishes and the investment targets. These pension funds have now taken a further step in the direction of creating a more sustainable investment platform by looking into projects that benefit the very society and people own them.

The financial and economic crisis means that public construction projects are on a diet, but now there are signs that there may be a tremendous boost on the way to the Danish infrastructure. A telephone survey done by a independent think tank, shows that the country’s ten largest pension and the state owned, ATP, are willing to invest nearly 60 billion kroner in the Danish infrastructure such as a harbour tunnel in Copenhagen, sewers or a large bridge between some of the main island of the country. According to calculations this will create 7,200 new Danish jobs annually over a period of 10 years when billions are invested in public works projects.

This means that there is cash then the government just need to provide the projects and vision needed to make it a reality.

Getting to the context of CSR – Letting mentally handicapped people contribute

I think that we are becoming to preoccupied with communicating about CSR, on the business case and on showing the value of CSR on the balance sheet, when it is really about business doing a difference in society. We think that when one lives in a welfare state like Denmark, where the government will tender to all your needs there wouldn’t be any need for locally context based CSR activities other than sponsoring the local football club. But the thing is that there are plenty of opportunities for companies to make a real difference to people who really appreciate the effort.

As one of the many activities I engage in is my work with the Danish association LEV. LEV is a private national association for retarded people, relatives and others that were formed in 1952. Basically covering handicapped people ranging from Asperger and ADHD to people with Downs and other relative heavy diagnosis. People, who can function in society, but need varying degrees of support and structure in order to do so.

One of the biggest issues that these handicapped people have is that they are being shoved away in state sponsored initiatives and offers, where they are isolated from the rest of society. One could call it that the “blanket of the welfare state” has covered them protecting people from harm, but making them unable to move. This is of cause done with the best of intentions shielding the weak in society from all the bad things that could happen (and maybe also shielding society from them). But an unfortunate side effect is that these people become isolated, their personal development stagnates and they feel that they are not offered the opportunity to contribute to society like everybody else.

However, I’m sure that there is room for one or two people in every workplace that is not exactly fitting into our perception of normality. I am also sure that many institutions have tasks that are waiting for employees, who will take pride in doing the tasks that we normally never get done, because they are routine and mundane. It may well be that an employee who is disabled does not have the same skills and resources as the rest of us, but they have something to contribute that we all can benefit from.

Some companies have already discovered that working in close corporation with local NGO like LEV on specific areas can actually make CSR very real to employees and customers alike. Even though they have not framed the initiatives as CSR in their own communication their activities are testimonials to some of the values that guide them.

To many companies CSR have become something that is detached from the day-to-day operations. Initiatives that are within communicated as CSR are more or less reduced to CO2 emissions, Codes of Conducts, Signing charters and different forms of philanthropy. But it does not have to be like that. CSR can actually be much more concrete, down to earth and close to the employees. By inviting a handicapped person into the organisation one gets a real idea about the values and ethical outlook of the company one is part of. The handicapped that are willing and able are more than happy to be invited into companies, where they can earn their own money and contribute on an equal basis with other employees.

I’m not saying that it is easy and it does require that the people who are involved also knows what they are going into, but the organisational benefits are huge. Not only to the individual handicapped person, but also to the employees that work with them and to the company as a whole.

Vestas is about to fail yet again

Vestas wind turbine, Dithmarschen.

Windmill

The CEO Ditlev Engel of Vestas has yet again failed to meet the targets he and his management team have set for the company. While Vestas made the target of securing orders for over 7000 MW it failed to control costs in other parts of the company.

The Wind turbine manufacturer has once again disappointed investors with a noticeable downward adjustment because of delays and excessive extra costs compared to planned.

The revision of expected earnings of 255 million. euro to around zero enforces the sentiment among Vestas investors and analysts that there are management issues at Veatsas. Ditlev Engel acknowledges flatly that it is not good enough. “It is the second time within a short time that the introduction of new technology creates problems. It is obviously not good enough,” he says to epn a Danish business newspaper.

Basically this means that the Vestas stock is about to take another big hit within the next few days. In the past 52 weeks the stick has lost 60% of its value moving from a high of 232 down to 69 kr per share. And with the latest proclamation there is no reason to think that it will not fall even further.

According to Vestas are the problems associated with new technology for their V112-3.0 MW mill. and higher than expected costs of production. This should be seen in light that just a few months ago the company fired 3000 employees in Denmark.

15% of Danish companies are breaking the law

In a resent survey of annual reports it was found that around 15% of all the Danish companies that are required to report on their CSR activities did not deliver. In 2008 a new law was implemented that required the 1100 biggest companies in Denmark to report on their CSR activities. It is required that companies state in the annual report what their CSR policy is, how they report on this and what progress they have made.

This might seem relatively easy but for around 165 companies it was too much to handle. The main issue was that companies could not show consistency between policy, reporting and subsequent action. This meant that some might have a CSR policy but reported on indicators, which was inconsistent with this policy or they had identified issues in the reporting but to actions, which did not, related to the issues identified.

Well it is apparently very hard for Danish companies to understand the relationship between company policy, reporting and required action lets hope that this does not relate to other areas that they are active in.

Denmark to be fossil free by 2050 – a comparative advantage

«Deep Sea Delta», boreplattform, her i Nordsjøen

Oil platform

Most of the developed countries have agreed to reduce its dependence on fossil fuels. By the Kyoto accord the number greenhouse gasses have to be reduced 5,2% by next year and the EU have set ambitious target of 30% reduction by 2020. But now Denmark is setting even higher goals as the ambition is to be independent of all fossil fuels by 2050 that is Denmark will be self sufficient on coal, oil and gas. With these initiatives the CO2 reduction will for Denmark alone be around 35% to 40% in the ear 2020 e.g. 5% higher than the EU target.

While most of us will agree that this could very well be too ambitions a target to go for but none the less it is what the government is aiming for. So will this not make Denmark less competitive in the future you might ask? Well according to the Danish minister, Martin Lidegaard, for energy it is what is going to make the country the even more competitive.

According to the International agency energy the price of fossil fuels will go up by one third towards 2035. This means that crude oil will be traded from somewhere between 140 and 160 USD on an average day of trading. Even though one cannot make a direct link between the price of crude and the price one have to pay at the gas station there is no doubt that the increase is going to be significant. Together with the other types of fossil fuels that we need it all amounts up quite a big expense that ordinary people have to pay, money mind you that could go to other purposes.

It is this comparative advantage the government will take advantage of and being first mover can prove to have its advantages. In the governments plan Denmark will be the birthplace of green and sustainable energy innovation. A whole industry will flourish and companies and universities will work together in order to crate and share knowledge that will make it possible to achieve the targets. Energy consumption will be taxed (even harder) so to give incentive to consumers and companies so that they reduce their use of energy even more than they do now.

The ambition is that Denmark should be dependent on “green” electricity. This will be done through a capacity increase of a 1200MW windmill farm on the ocean and by building 1800MW of windmills on land. A rough calculation based on some of the biggest windmills we have today will mean that around 600 mills have to be built. There will also be a massive increase in biomass fuels in order to substitute fuel like coal.

I would like to think that Denmark can gain a comparative advantage by becoming a greener nation than the rest of the industrialised world, but there are some things that have to be realised if this dream is to become true. First fuel prices have to go up significantly as it is predicted and secondly no one else is setting even more ambitious goals that could mean that we get outcompeted even bore we start.

As the situation is right now there seem to be no consensus by the biggest energy consumers in the world to reduce its consumption. As long as they keep on being divided there is a good chance that the plan might work and that Denmark will remain one of the top nations in the world. Just imaging the difference it will mean if the US remains on its current energy course and the price of oil reaches 200 or 250 USD what will it mean to society and not least what will it mean to Denmark that will not have to worry. Well it is food for thought.