Business and Society: Corporate Social Responsibility
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Business and Society:Corporate Social Responsibility
Professor Alexander SettlesFaculty of Management, State University – Higher School of Economics
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What is Corporate (Social) Responsibility (CSR)?
Definitions and Terms Corporate social performance Corporate social responsibility Social Capital Corporate responsibility Business Ethics Socially responsible investing Business Ethics Human Capital Corporate Citizenship Corporate Accountability Sustainability Sustainable Development
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What is Corporate Social Responsibility (CR)?
Internal Business Ethics Human resource / personnel
management Labor standards of suppliers
External Social – local and global Environmental
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Responsibilities of Business
Economic
(must do)
Legal
(have to do)
Ethical
(Should Do)
Discretionary
(Might Do)
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Milton Friedman’s Traditional View of Business Responsibility
“There is one and only on social responsibility of business – to use its resources and engage in activities designed to increase profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.” (1970)
Economic
Ethical
Legal
Ethical
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CSR Components
Business Ethics Environment Rule of Law – Anti-Corruption Labor Market Conditions Environmental Risks Social/Political Risks Corporate Governance Risks
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Frameworks - Triple Bottom Line
(a) Economic bottom line. Although main emphasis is on financial performance, this often refers not only to profit but to the philosophies behind a company's strategy or behavior, the sustainability of its businesses and its 'human capital'.
(b) Environmental bottom line. The impact of its products or operations on the environment, plus the nature of its emissions and waste and how it is dealing with them.
(c) Social bottom line. How it approaches issues such as ethnic and gender diversity, working hours and wages, staff security and its contribution to community services or facilities.
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WBI Framework
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WBI: CR as an Integrated Approach
A comprehensive set of policies, practices and programs
Integrated into business operations, supply chains, decision making processes
Includes responsibility for current and past actions as well as future impacts
Issues vary by company size, sector, and location
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UN Approach: Global Compact
Human RightsPrinciple 1: Businesses should support and respect the
protection of internationally proclaimed human rights; and Principle 2: make sure that they are not complicit in human
rights abuses. Labour StandardsPrinciple 3: Businesses should uphold the freedom of
association and the effective recognition of the right to collective bargaining;
Principle 4: the elimination of all forms of forced and compulsory labour;
Principle 5: the effective abolition of child labour; and Principle 6: the elimination of discrimination in respect of
employment and occupation.
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UN Global Compact
EnvironmentPrinciple 7: Businesses should support a precautionary
approach to environmental challenges; Principle 8: undertake initiatives to promote greater
environmental responsibility; and Principle 9: encourage the development and diffusion
of environmentally friendly technologies Anti-CorruptionPrinciple 10: Businesses should work against all forms
of corruption, including extortion and bribery.
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Russian Firms in the Global Compact – Joined
Analytmarketing Joint Stock Company, 2001/06/21 Intersputnik International Organisation of Space, Communications
Technology Hardware & Electrical Equipment, 2003/01/03 Iteren, Professional, Scientific and Technical Services, 2004/05/11 Joint Stock Company Foreign Trade Association, 2002/03/22 JSC "Murmanelectrosviaz", Telecommunication, 2002/06/27 JSC ALTEN, Construction Materials 2005/06/21 Kirov State Air Enterprise, Aerospace & Aviation 2002/03/22 Moscow City Telephone Network, Telecommunication 2002/06/27 MTK Companies Group, Telecommunication 2002/06/27 Murmanelectroviaz Telecommunication 2002/06/27 Nefteyugansk United Airline Transportation Company, Aerospace &
Aviation 2002/03/22 Russian Aluminium Joint Stock Company, Metals & Mining 2002/03/27 Sistema JSFC 2002/08/31 Svyazinvest JSC, Telecommunication 2002/06/27
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Russian Firms in the Global Compact – Joined and submitted COP
CJSC ARM Group Enterprises, Utilities 2004/05/26
Interros, Finance & Insurance 2001/10/22
Volga-Dnepr Airlines, Aerospace & Aviation 2000/11/14
Yukos Oil, Oil & Gas 2001/08/15
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US Corporate Responsibility
CSR / Corporate Social Performance has existed in some form for more than 25 years in the U.S.
Sources of CSR/CSP: Environmental regulation Foreign Corrupt Practices
outlawed Development of Socially
Responsible Investment community
Institutional investors place pressure on corporations
Employee retention and development are crucial for success
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Corporate Citizenship – US approach
Good corporate citizenship; Provision for a safe and healthy workplace; Exemplary employment practices; Responsible environment protection and practices; Contribution to the overall growth and
development of the local economy; Implementation of activities that are compatible
with local science and technology policies Compliance with international, and local laws,
focusing on anti-corruption, anti-bribery and transparency.
Source: US Department of State
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US CSR Activities
Business organizations The Business Council Business Roundtable The Conference Board
Investment screening Investor Responsibility Research Center Dow Jones Sustainability Indexes
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Russian Approach
RSPP – Social Charter Economic and financial stability (pay
taxes) Quality of production (customers) Labor Relations Human rights Protect the environment Form local associations to work with
local stakeholders and government
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Russian Approach
Measuring UNDP & Russian Association of
Manager’s Report “About the social investments in Russia in 2004”
AMR’s “Business and the social development of Russia: problems and prospects” 2006
Reporting Accountability Global Reporting Initiative (GRI)
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Examples of Russian Reports
Alfa Bank British American Tobacco Russia JSC Gazprom JSC Lukoil Oil Company McDonald's Russia North-West Timber Company OJSC MMC Norilsk Nickel RAO UES RUSAL Sibneft (Gazprom Neft) YUKOS Oil Company PC
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Corporate Responsibility as Firm Strategy Examples
Environmental concerns or fair trade concerns allow for companies to charge premium prices – Ben & Jerry’s Homemade Inc. and The Body Shop
Trustworthiness may generate enduring relationships with suppliers - Maytag
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Corporate Responsibility as Firm Strategy Examples
Firms can attract outstanding employees that desire to work for a responsible firm – Procter & Gamble
They are more likely to attract capital infusions from investors who view reputable companies as desirable long-term investments - Rubbermaid
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CSR and Risk Management
Protecting and enhancing reputation, brand equity and trust
Attracting, motivating and retaining talent Managing and mitigating risk Improving operational and cost efficiency Ensuring license to operate Developing new business opportunities –
new products and services, new markets, new alliances, new business models
Creating a more secure and prosperous operating environment
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Sources of Social Risk
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Social Risk Equation
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Social Risk as Managed Strategic Risk
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Evolution of Social Risks
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Reputation, Corporate Responsibility, and Competitiveness
Does a socially responsible commitment by corporations improve the business climate?
What are the results from the US and other western countries?
The CCG has played a role in exposing the academic community to Corporate Governance practices and CSR issues
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Corporate Social Reporting – Some of the Standards
Global Reporting Initiative AA1000 & AA1000SES – AccountAbility SA8000 SAI Business process standards
ISO 9000 "quality management” ISO 14000 "environmental management”
IAASB’s International Standard on Assurance Engagements
ISO 26000 “corporate social responsibility – published by 2008
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Stakeholder Engagement Model
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Engagement Questions for the Firm
What is the issue or problem? How complex is it? What is its scope? Who else has an interest in the
problem? What is working and not working in
the current approach? What would be accomplished by
engaging others in the dialogue?
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Reporting Concepts
Determine information requirements for early sensing and reporting
Establish reporting protocols Reporting chain Reporting frequency (e.g., urgent vs. routine) Reporting templates
Create metrics that support: Measurement and assessment of risk impact Aggregation and prioritization (including common taxonomy) Meaningful and contextualized understanding of material risks
Develop protocols for early warning indicators for immediate reporting/action
Identify internal and external information sources Define reporting tools
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Reporting Standards
Stakeholder Involvement Subject Area
Environmental Labor Transparency and Ethics
Industry Area Forestry Mining Oil and Gas Telecommunications Hospitality
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Sustainability Reports
Understanding of a company’s economic, social, and environmental position What kind of company are we? What are the key issues for long term
financial growth and sustainability? What are the pressures on the company? How should the company be positioned?
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Sustainability Reporting
Risks to the company – Defining the scope What are the risks? Who is evaluating the risks? How often?
Proactive versus Reactive Setting policies
Who sets the policies? What is the Board of Directors involvement?
Involving the company Involving stakeholders
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Sustainability Reporting
Who is the audience? Employees Government Public Investors Stakeholders
What will be disclosed? Operational Issues
Information gathering and control systems Standard operating procedures Internal reporting Assurance
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