Corporate Social Responsibility (CSR)

y Corporate Social Responsibility (CSR) is becoming an

increasingly important activity to businesses nationally and internationally. As globalization accelerates and large corporations serve as global providers, these corporations have progressively recognized the benefits of providing CSR programs in their various locations. CSR activities are now being undertaken throughout the globe.

What is corporate social responsibility

y The term is often used interchangeably for other terms such as

Corporate Citizenship and is also linked to the concept of Triple Bottom Line Reporting (TBL), which is used as a framework for measuring an organization's performance against economic, social and environmental parameters. y The rationale for CSR has been articulated in a number of ways. In essence it is about building sustainable businesses, which need healthy economies, markets and communities. y The key drivers for CSR are:
1. Enlightened self-interest 2. Social investment 3. Transparency and trust 4. Increased public expectations of business

Corporate Social Responsibility

Preliminary definitions of CSR
y The impact of a company s actions on society y Requires a manager to consider his acts in terms of a

whole social system, and holds him responsible for the effects of his acts anywhere in that system

Definitions and Relationships

y Corporate social responsibility (CSR) is the process

by which businesses negotiate their role in society y In the business world, ethics is the study of morally appropriate behaviors and decisions, examining what "should be done y Although the two are linked in most firms, CSR activities are no guarantee of ethical behavior

Corporate Social Responsibility Continuum

Do more than required; e.g. engage in philanthropic giving Integrate social objectives and business goals

Maximize firms profits to the exclusion of all else

Fight social responsibility initiatives

Balance profits and social objectives

Do what it takes to make a profit; skirt the law; fly below social radar

Comply; do what is legally required

Articulate social value objectives

Lead the industry and other businesses with best practices

Corporate Social Responsibility (CSR)

Corporate Citizenship Concepts y Corporate social responsibility emphasizes obligation and accountability to society y Corporate social responsiveness emphasizes action, activity y Corporate social performance emphasizes outcomes, results

Corporate Social Responsibility (CSR)

Business Criticism/ Social Response Cycle
Factors in the Societal Environment Criticism of Business Increased concern for the Social Environment A Changed Social Contract

Business Assumption of Corporate Social Responsibility Social Responsiveness, Social Performance, Corporate Citizenship A More Satisfied Society Fewer Factors Leading to Business Criticism Increased Expectations Leading to More Criticism

Corporate Social Responsibility (CSR)

Historical Perspective
the invisible hand of the marketplace protected societal interest y Legal model laws protected societal interests
y Economic model

Corporate Social Responsibility (CSR)

Historical Perspective
y Modified the economic model y Philanthropy y Community obligations y Paternalism

Corporate Social Responsibility (CSR)

Historical Perspective
y What was the main motivation? y To keep government at arms length

Corporate Social Responsibility (CSR)

Historical Perspective From the 1950 s to the present the concept of CSR has gained considerable acceptance and the meaning has been broadened to include additional components

Corporate Social Responsibility (CSR)

Evolving Viewpoints
y CSR considers the impact of the company s actions on

society (Bauer) y CSR requires decision makers to take actions that protect and improve the welfare of society as a whole along with their own interests (Davis and Blomstrom)

Corporate Social Responsibility (CSR)

Evolving Viewpoints
y CSR mandates that the corporation has not only

economic and legal obligations, but also certain responsibilities to society that extend beyond these obligations (McGuire)

Corporate Social Responsibility (CSR)

Evolving Viewpoints y CSR relates primarily to achieving outcomes from organizational decisions concerning specific issues or problems, which by some normative standard have beneficial rather than adverse effects upon pertinent corporate stakeholders. The normative correctness of the products of corporate action have been the main focus of CSR (Epstein)

Corporate Social Responsibility (CSR)

Carroll s Four Part Definition y CSR encompasses the economic, legal, ethical and discretionary (philanthropic) expectations that society has of organizations at a given point in time

Corporate Social Responsibility (CSR)

Carroll s Four Part Definition Understanding the Four Components
Responsibility Economic Legal Ethical Societal Examples Expectation Required Be profitable. Maximize sales, minimize costs, etc. Required Expected Obey laws and regulations. Do what is right, fair and just. Be a good corporate citizen.

Discretionary Desired/ (Philanthropic) Expected

Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright 2003 by South-Western, a division of Thomson Learning. All rights reserved

Pyramid of CSR

Corporate Social Responsibility (CSR) CSR in Equation Form Is the Sum of:
Economic Responsibilities (Make a profit) Legal Responsibilities (Obey the law) Ethical Responsibilities (Be ethical) Philanthropic Responsibilities (Good corporate citizen) CSR

Corporate Social Responsibility (CSR)

Stakeholder View
Stakeholder Group Addressed and Affected CSR Component Economic Legal Ethical Philanthropic Owners Con- Employees Community sumers 1 4 2 3 3 4 3 2 1 4 1 2 2 4 3 1 Others 5 5 5 5

Corporate Social Responsibility (CSR) Arguments Against

y Restricts the free

market goal of profit power maximization y Limits the ability to y Business is not compete in a global equipped to handle marketplace social activities y Dilutes the primary aim of business

y Increase business

Stakeholder Approach
According to the Stakeholder Approach: y In defining or redefining the company mission, strategic managers must recognize the legitimate rights of the firm s claimants. y In addition to stockholders and employees, these include outside stakeholders affected by the firm s actions.

Perceived Stakeholders
y Customers y Government y Stockholders y Employees y Society

Steps to Incorporate Stakeholders:

1. 2. 3. 4.

Identification of stakeholders Understanding stakeholders specific claims vis--vis the firm Reconciliation of these claims and assignment of priorities Coordination of the claims with other elements of the company mission

Dynamics of Social Responsibility

y y y y
y y y y y

Inside vs. Outside Stakeholders Duty to serve society plus duty to serve stockholders Flexibility is key Firms differ along:
Competitive Position Industry Country Environmental Pressures Ecological Pressures

Corporate Social Responsibility (CSR) Arguments For

y Addresses social issues y Limits future government

business caused and allows business to be part of the solution y Protects business selfinterest

intervention y Addresses issues by using business resources and expertise y Addresses issues by being proactive

Corporate Social Responsibility (CSR) Business Responsibilities in the 21st Century

y Demonstrate a commitment to society s values and

contribute to society s social, environmental, and economic goals through action. y Insulate society from the negative impacts of company operations, products and services. y Share benefits of company activities with key stakeholders as well as with shareholders. y Demonstrate that the company can make more money by doing the right thing.

Corporate Social Responsiveness

Evolving Viewpoints y Ackerman and Bauer s action view y Sethi s three stage schema y Frederick s CSR1, CSR2, and CSR3 y Epstein s process view

Corporate Social Performance

Extensions and Reformulations
y Wartick and Cochran s extensions y Wood s reformulations y Swanson s Reorientation

Corporate Social Performance

Corporate Social Performance Nonacademic Research

y Fortune's ranking of most and least admired

corporations y Council on Economic Priorities Corporate Conscience Awards y Business Ethics Magazine Awards y WalkerInformation s Research on the impact of social responsibility

Corporate Citizenship
Corporate citizenship embraces all the facets of corporate social responsibility, responsiveness and performance

Social and Financial Performance

Perspective 1: CSP Drives the Relationship
Good Corporate Social Performance Good Corporate Financial Performance Good Corporate Reputation

Perspective 2: CFP Drives the Relationship

Good Corporate Financial Performance Good Corporate Social Performance Good Corporate Reputation

Perspective 3: Interactive Relationship Among CSP, CFP, and CR

Good Corporate Social Performance Good Corporate Financial Performance Good Corporate Reputation

Social and Financial Performance

A Multiple Bottom-Line Perspective

Socially Conscious or Ethical Investing

Social screening is a technique used to screen firms for investment purposes

CSR s Effect on Mission Statement

y The mission statement embodies

what company believes y Managers must identify all stakeholder groups and weigh their relative rights and abilities to affect the firm s success

Social Audit
y A social audit is an attempt to

measure a company s actual social performance against its social objectives. y The social audit may be used for more than simply monitoring and evaluating firm social performance.

Five Principles of Successful CSIs

1. 2. 3. 4. 5.

Identify a Long-Term Durable Mission Contribute What We Do *

*This is the most important principle

Contribute Specialized Services to a Large-Scale Undertaking Weigh Government s Influence Assemble and Value the Total Package of Benefits

The Limits of CSR Strategies

y

Some companies have embedded social responsibility and sustainability commitments deeply in their core strategies. Larger companies must move beyond the easy options of charitable donations but also steer clear of overreaching commitments. CSR strategies can also run afoul of the skeptics the speed of information on the Internet makes this an issue with serious ramifications.

The Future of CSR

y y

y y

CSR is firmly and irreversibly part of the corporate fabric Corporations will face growing demands for social responsibility contributions far beyond simple cash or in-kind donations The public s perception of ethics in corporate America is near its all-time low Even when groups agree on what constitutes human welfare, the means they choose to achieve it may differ

Management Ethics
The Nature of Ethics in Business: y Belief that managers will behave in an ethical manner is central to CSR y Ethics the moral principles that reflect society s beliefs about the actions of an individual or a group that are right and wrong y Ethical standards reflect the end product of a process of defining and clarifying the nature and content of human interaction

Approaches to Questions of Ethics

y Utilitarian Approach y Moral Rights Approach y Social Justice Approach y Liberty Principle y Difference Principle y Distributive-Justice Principle y Fairness Principle y Natural-Duty Principle

Code of Business Ethics

y

To help ensure consistence in the application of ethical standards, an increasing number of professional associations and businesses are establishing codes of ethical conduct.
The following all have ethics codes:
y y y y y y

Chemists Funeral directors Law Enforcement Agents Hockey Players Librarians Physicians

Major Trends in Codes of Ethics

Increased interest in codifying business ethics has led to both the proliferation of formal statements by companies and to their prominence among business documents. 2. Such codes used to be found solely in employee handbooks. 3. Companies are adding enforcement measures to their codes. 4. Increased attention by companies in improving employees training in understanding their obligations under the company s code of ethics.
1.

Implications for Enterprises: CSR Management

How do companies address socio-environmental & legal compliance issues? Policies - Code of Conduct Systems - Compliance Management Reporting - Accounting and Reporting

CSR Management: Systems approach

Sustainable business development does not come about of its own accord. Rather, commitment to sustainability demands that corporate processes be reliably controlled and that everyone's actions in finance as much as in environmental and social areas - be coordinated. Prerequisites for this are binding guidelines, unambiguous corporate goals and a clear organizational structure.

CSR Management: Management structure

VP of Human

Corporate Responsibility Officer

CSR Management: Plan, Do, Check, Act method

Plan
Consult stakeholders Establish code of conduct Set targets

Do
Establish management systems and personnel Promote code compliance

Act
Corrective action Reform of systems

Check
Measure progress Audit Report

Code of Conduct: Widespread adoption among TNCs

Adoption of
More than half of the 100 largest firms by global revenue (Fortune Global 100) More than a third of the 100 largest firms by foreign assets (UNCTAD WIR 100) 57% of all foreign assets 51% of all foreign sales 65% of all foreign employees

Codes found among all industrial sectors.

Not Specified 12% Multi-Sector 7% Technology 17%

Heavy Industry 27% Light Industry 17%

Services 20%

Source: OECD 1999 survey of 233 codes

Code of Conduct: Issue emphasis varies by industry

Heavy Industry Light Industry Services Environment Fair Employment & Labour Rights Rule of Law Fair Business Practices

Technology

Multi-Sector
0 20 40 60 80 100

% of Codes addressing issue

Code of Conduct: Emerging consensus on key issues

Bribery/improper payments Conflict of interest Security of proprietary information Receiving gifts Discrimination / equal opportunity Giving gifts Environment Sexual harassment Antitrust Workplace safety Political activities Community relations Confidentiality of personal information Human rights
0% 25% 50% 75% 100%

% of codes addressing issue

Code of Conduct: Cascade effect

100%

82%
as % of all codes surveyed 75%

50%
50%

34%
25%

22%

0%

Company

Contractors

Subcontractors

Customers

Code of Conduct: Cascade effect

Suppliers/ Vendors JV Partners
Giving gifts Receiving gifts Bribery/improper payments Conflict of interest Environment Discrimination / equal opportunity Sexual harassment Workplace safety Human rights Political activities Whistleblowing Child labor Nepotism
0% 10% 20% 30% 40% 50%

% of COE applying to JV partner or Supplier/Vendor

Sphere of Influence
Who is to be influenced?

Sphere of Influence
What issues are to be influenced?

Sphere of Influence
How are those issues to be influenced?

Sphere of Influence
Example: Mattel Who: suppliers, JVs and branch plants What: OSH How: focus on manufacturing processes, HR, factory design

CSR Management: Governing the value chain

Compliance Management: Management by certification

ISO 14000 by Region
Far East Aust./ New Zealand

SA 8000 by Region
Europe

Africa/ W. Asia

S. America N. America Europe

Asia

N. America Africa S. America

Introduced 1995 By 2002: 37,000 factories, 112 countries

Introduced 1998 By 2005: 763 factories, 47 countries

Compliance Management: Management by certification

ISO 26000: Social Responsibility

To be Introduced in 2009 or 2010 NOT a Management System (?) NOT a Certifiable Standard (?)

ISO 26000 Roadmap

Principles of SR
1. Ethical behaviour 2. Respect for rule of law 3. Respect for international norms of behaviour 4. Respect for and considering of stakeholder interests 5. Accountability 6. Transparency 7. Precautionary approach 8. Respect for human rights

Core Subjects
Organizational Governance

Implementing SR
7.3 Working With Stakeholders

7.2 Defining scope Fair operating practises Community & society development Consumer issues Labour Practises Human Rights

7.4 Integrating into organization 7.5 Implementing in daily practise 7.7 Evaluating performance 7.8 Enhancing credibility

Environment

7.3 Communicating