Corporate Social Responsibility

MBA 570Summer 2011

Objectives for this session:

At the end of this session, you should be able to identify and describe:

A definition for CSR Reasons for having a CSR program Objections to CSR What makes a CSR program How a CSR program is communicated Principles of reporting for CSR Some alternative viewpoints on CSR

Corporate Social Responsibility?

What is:

I think many people assume, wrongly that a company exists simply to make money. While this is an important result of a company’sexistence, we have to go deeper and find the real reasons for our being.As we investigate this, we inevitably come to the conclusion that a groupof people get together and exist as an institution that we call a company sothat they are able to accomplish something collectively that they could not accomplish separately – they make a contribution to society, a phrase which sounds trite but is fundamental.

Dave PackardCo-founder of Hewlett Packard Company in 1939

Scrooge said to the ghost of his partner Marley – But you were always a good man of business, Jacob – to which the ghost replied – Business! Mankind was my business. The common welfare was my business; charity, mercy, forbearance, and benevolence were all my business. The dealings of my trade were but a drop of waterin the comprehensive ocean of my business!

A Christmas Carol, Charles Dickens (1843)

Also known as:

Corporate Citizenship

Corporate Responsibility

Responsible Business

Sustainable Responsible Business (SRB)

Definition:

“Specifically, we see CSR as the voluntary actions that business can take, over and above compliance with minimum legal requirements, to address both its own competitive interests and the interests of wider society.”

Source: www.csr.gov.uk

The notion of companies looking beyond profits to their role in society is generally termed corporate social responsibility (CSR)….It refers to a company linking itself with ethical values, transparency, employee relations, compliance with legal requirements and overall respect for the communities in which they operate. It goes beyond the occasional community service action, however, as CSR is a corporate philosophy that drives strategic decision-making, partner selection, hiring practices and, ultimately, brand development.

South China Morning Post, 2002

Why CSR? Consumers & investors: growing expectation for

organizations to behave responsibly

Consumer awareness: ‘Green’ and ‘Ethical’ consumerism

Legislation: H&S, EPA, Sustainability, Codes of Practice

Globalisation: Adoption of ‘Best Practice’, Consumer & Legal Acceptance.

Result = empowered stakeholders

Business advantages of CSR:Human Resources Recruitment, retention and morale of Staff Risk Management Investment in ‘ethical brand equity’ ‘Greenwash’ effect?

Brand Differentiation As USP Build brand loyalty Reputation and brand attractiveness

Business advantages of CSR:Business Development New markets, products and servicesResources Management Better management and conservation of

strategic assetsStakeholder Management Better internal and external relationships Freedom of operation: reduce government,

public, NGO intervention in organization

adds value

Corporate Social Responsibility:

Why not CSR? May take management focus away from core

business activity Restricts the free market goal of profit maximization Business is not equipped to handle social activities May appear cosmetic – without genuine social benefit May make organization more vulnerable to revelation

of bad / unethical business practice A restriction to free trade? (does it limit the ability to

compete in a global marketplace?)

Economist, Milton Friedman says:

“The social responsibility of business is to increase its profits.”

“What does it mean to say that "business" has responsibilities? Only people can have responsibilities.”

“…in a free society there is one and only one social responsibility of business – to use its resources and engage in activities designed to increase its 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."

Some of the most common ways in which CSR is demonstrated: Specialist ‘adopted’

projects Corporate charitable

donations Voluntary schemes for

staff Staff fundraising

activities Changes to

organizational operations

The four components of CSR:Responsibility Societal

ExpectationExamples

Economic Required Be profitable. Maximize sales, minimize costs, etc.

Legal Required Obey laws and regulations.

Ethical Expected Do what is right, fair and just.

Discretionary(Philanthropic)

Desired/Expected

Be a good corporate citizen.

Communicating Corporate Social Responsibility

General values statement organizations should develop a general

values statement which reflects their stance towards CSR

This may form part of a more comprehensive Mission Statement

Should define ethical framework that guides the accomplishment of the overall mission of an organization within a society

Example: organizational Focus

JP Morgan Chase

Example: Environmental Focus

Coca Cola

Example: Customer Focus

Home Depot

Example: Employee Focus

Johnson and Johnson

Example: Stakeholder Focus

Credit Suisse

United Technologies

Example: Social Focus

Bristol-Myers Squibb

Reporting CSR:

CSR projects may be administered and communicate achievements via:

A dedicated CSR section or department The HR department Business development section Public Relations department Directly via CEO and / or Board of Directors

Reporting Formats:The ‘Triple Bottom Line’ Concept developed by John Elkington in

1994 Expects organizations to be responsible to

‘stakeholders’ interests rather than ‘shareholders’ profit

Related concepts:◦ Full-cost accounting◦ Social entrepreneurialism◦ Social and natural capital

Reporting Formats:The ‘Triple Bottom Line’

This means expanding the traditional reporting framework to take into account performance in terms of:

Social (People)Environmental (Planet),

as well asFinancial (Profit)

So what really is Modern CSR?

◦ CSR can really be discussed as separate areas for a business…

• Corporate governance and access to capital• Human capital management: Getting better people and keeping them• Doing business honestly – effective measures against corruption• Improving community relationships and building a bank account of trust• Communicating well with consumers, and treating them right• Better environmental and social risk management• Cost savings via environmental efficiencies• Better relations with governments, at home and abroad • A great way to find new opportunities for products and services • VIDEO Stakeholder theory:

http://www.bentley.edu/conscious-capitalism/index.cfm (19-24mins)

◦ “Opportunity” Examples include: BP, Unilever, Marks and Spencer, Nike, Waitrose, Timberland, Cadbury, Sky, and many others

CSR around the word…

• In India, it often means working with NGOs, taking a philanthropic approach  

• In Colombia, it can mean helping with post conflict reconstruction and societal rebuilding 

• In South Africa, it can mean building up a supply base, that is both economically sustainable and worker-friendly – and helping tackle HIV / Aids. 

• In France, it can mean picking up where the government has failed on some social issues, negotiated agreements on working hours and conditions, and environmental issues 

• In Ukraine, it can mean sponsoring church rebuilding, book publishing and encouraging basic skills improvements in the workforce, alongside health and safety

• Finally, in Cambodia, it can mean a partnership with the ILO, NGOs and IGOs to create a ‘cluster’ of factories where labour standards and union rights are respected.

CSR 2.0: The New DNA of Business

CSR can only be resilient if it is part of the DNA of an organization, i.e. CSR will only survive the vagaries of fickle markets, fluctuating profits, financial crises and leadership whims if it is totally embedded in the corporate culture, strategy and governance systems”

– Wayne Visser, 2008Copyright CSR International / Wayne Visser 2010

Environmental Integrity

Societal Contribution

Good Governance

ValueCreation

CSR 2.0

Other sources for CSR reporting:

‘Sustainability Guidelines’ developed by the Global Reporting Initiative

(www.globalreporting.org)

SA800 certification developed by the international human rights organization Social Accountability International.

(www.sa-intl.org)

Other sources for CSR reporting:

The Green Globe program for ‘benchmarking, certification and performance improvement’, based on Agenda 21 proposals from the 1992 Rio Earth Summit

(www.greenglobe.org)

ISO 14000 international environmental management standards

(www.14000.org)

Other sources for CSR reporting:

The United Nations Global Compact (UNGC) framework and mechanism designed to encourage businesses to adopt CSR policies

(www.unglobalcompact.org)

The FTSE 4 Good Index – measures the performance of companies who meet globally recognised CSR standards.

(www.ftse.com/Indices/FTSE4Good_Index_Series)

Alternative sources of information:

www.corpwatch.org

www.naomiklein.org

In conclusion:In this session we have looked at: What is CSR Why CSR is likely to be come more widely

adopted The business case for CSR The Value Statement (Customer, Employee,

Stakeholder and Social focus) Reporting and Accountability options for CSR

including the ‘Triple Bottom Line’ concept CSR and social criticism of international

organizations