Case 4: Scotbar Mining Flashcards
Background
- Scotbar bought an old quarry. In 2011 a flash flood hit the city and Payne (CEO) directed his employees to use company equipment and helped saving 80 people
- Government asked to use quarry as a temporary toxic waste dump. Payne agreed to the disposal of contaminated waste on his quarry.
- After that, and 3 years later, Scotbar was basically shut down
- Scotbar received no compensation for lost revenues during that time
- In 2014, Scotbar developed a process to convert sandstone to sand, a technique that large multinational mining companies failed to perfect. The product was even better than other, cheaper sands and had plenty advantages.
- This method was more environmentally friendly than simply using natural sand by dredging it from sea beds or rivers
- Another innovation: Scotbars sandstone tiles with reduced weight
- Scotbar decided not to patent its processes in hopes that more companies would adopt it so that the environment profits
- Also, competitors would find an easy way to circumvent the patents
- But was this really the right approach to sustainability through innovation?
- Furthermore, Scotbar planted local species trees around its mining cites
What is the Triple Bottom Line?
According to the idea of the triple bottom line (3BL)(people, planet, profit), 3 dimensions: economic, social and environmental aspects constitute the basis of sustainability and corporate social responsibility. For sustainability, a company should balance these 3 aspects instead of focusing one one.
How did Scotbar follow the triple bottom line?
- Scotbar tried to balance all three aspects (unlike other mining companies who focus only on profit!):
- New costly, but environmentally friendly mining process => may not be the profit maximizing way but is sustainable
- Wants to increase the rate of resource utilization and reduce waste -> environmentally friendly
- Uses sandstone from own quarry on land instead of dredging sand from sea-beds and rivers; plants trees around its mining sites => not harming environment
- Scotbar used company equipment to safe people in crisis (flood in 2011); allowed waste disposal on its quarry even though they lost revenues => supporting people and government
Possible resistance Scotbar might face?
- Competitors, price competition
- Customers, who focus on price and are not willing to pay much more
- Regulations, e.g. road construction
- Shareholders who aim for profit instead of csr
potential benefits/pro’s and harms that copyrights and patents (intellectual property rights) can have on sustainability
- used to prevent other companies from copying their products and innovations and are providing a competitive advantage
- Thus, they sustain innovation and the creation of new and better products as competitors need to come up with own solutions.
- Companies can license the use of its patented innovations and make profit
potential harms/con’s that copyrights and patents (intellectual property rights) can have on sustainability
- other companies cannot use the corresponding technologies from the patents to take advantage of them.
- Therefore, it is possible that the optimal solution to a problem can only be used by one company and thus is only accessible to a small extent.
- learning rates are higher if you can use the research data of other companies as well.
Was it the right decision for Scotbar not patenting its processes?
- Patenting its processes would indicate that Scotbar focuses on economic aspects and tries to maximize its profit by preventing other companies to use its technology
- Instead, Scotbar’s strategy is not only purely economic-driven, but also driven by social responsibility (triple bottom line) Consequently, patenting its processes would contradict to the strategy and its social mission.
- by openly appealing that it does not patent its processes, the company gains credibility and sends a strong message to customers – thereby potentially increasing the stickiness and loyalty of customers.
- applying for a patent is usually a very time-consuming and long process.
- the application will cost money, even if it is not successful.
- Scotbar has to make certain information about its technological process publicly available. This means, that other companies get insights about the technology and thereby offering them the possibility to catch up or even overtake with similar processes.
=> Yes, right decision not to patent
Link to CSR theory: Scotbar in the pyramid model of Caroll?
- Philanthropic Responsibilities: Yes, Scotbar used company equipment to safe people during the flash flood and let the government use its quarry for toxic waste disposal even though the company had to be shut down for 3 years. Also, they didn’t receive compensation for missed revenues for that time.
- Ethical Responsibilities: Yes, Scotbar plants trees around its mining sites to sustain the forest. They try to avoid harm for society and environment by providing an environmentally friendly way of sand production without dredging from sea-beds or rivers.
- Legal Responsibilities: Yes, they obey the law as it is required.
- Economic Responsibility: Yes, they intend to be profitable as it is required and the basis for business. Even though one could argue that they should have known better when they weren’t compensated for missed revenues after the flood. When helping during the flood, they somehow forgot their economic responsibilities.
Link to CSR theory: which vision (Benabou + Tirole) fits to Scotbar?
Scotbar can be linked to the first vision being Win/Win. The idea of Payne, the CEO, was to take a long-term perspective instead of focusing on short-term impacts of his decisions: He directed his employees to use company equipment to safe people in the flood and he allowed the government to use Scotbar’s quarry for the disposal of toxic waste. He believed it was “his civic duty” to help. He didn’t consider the consequences for the other stakeholders. Essentially, the company was shut down for years and missed out on revenues and profits in that time. By taking a long-term perspective he wanted to do good in short-term and do well in the long-term.
