The Responsibility of Business

Managing Sustainable Enterprise

GCSE 7508Griffith Business School

Asia Pacific Centre for Sustainable EnterpriseJanuary 2013

Jeremy Williamsjeremy.williams@griffith.edu.au

@jeremybwilliams@TheGreenMBA

facebook.com/profjeremybwilliamsjeremybwilliams.net

Session 2:

The Responsibility of Business

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A word or two from the forefather of modern capitalism

• ‘It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages.’ Adam Smith

Wealth of Nations, 1776

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The social responsibility of business …

• … is to increase its profits

Milton Friedman

‘CSR is the voluntary assumption by companies of responsibilities beyond purely economic and legal responsibilities’.

(Piacentini et al, 2000)

• ‘Corporate social responsibility can be defined as a principle stating that corporations should be accountable for the effects of any of their actions on their community and environment’.

(Frederick et al, 1992)

• ‘Corporate social responsibility is achieving commercial success in ways that honour ethical values and respect people, communities and the natural environment’.

(Business for Social Responsibility, 2003)

Sustainable Enterprise Economy

‘An economy where any enterprise – corporate, social or individual – aims to have as little impact on the environment as possible and is mindful of its social impact. In an enterprise economy the spirit of the community is geared to innovation, creativity, problem solving, entrepreneurialism and enthusiasm for life. A sustainable enterprise economy produces wealth, preserves the natural environment and nurtures social capital.’

Malcolm McIntoshSustainable Enterprise and Sustainable Futuresin Suder, G.G.S. (ed) International Business Under Adversity:A Role in Corporate Responsibility, Conflict Prevention and Peace (2008)

Asia Pacific Centre for Sustainable Enterprise, Griffith Business School

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The social responsibility of business …

http://www.youtube.com/watch?v=k44WifxDSX4

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The sceptics

• CSR is a mistake because it distorts market forces and increase firms‘costs

• They also challenge the view that the world is facing worsening social and environmental problems.

Professor David HendersonVisiting Professor, Westminster Business School, UK; former Head of Economics & Statistics Department, OECD

View Prof Henderson’s paper at: http://research.dnv.com/csr/PW_Tools/PWD/1/00/L/1-00-L-2001-01-0/lib2001/CSR_kritikk.pdf

Professor Steve H. HankeSenior Fellow at the Cato Institute and Professor of Applied Economics at the Johns Hopkins University

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The triple bottom line• “Is it progress if a cannibal uses a

fork?” – Stanislaw Lec                                     

John Elkington

Elkington (1997) asks this question in the context of 21st century capitalism as he ponders whether holding corporations accountable to a ‘triple bottom-line’ of economic prosperity, environmental quality, and social justice constitutes progress.

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Transparency, accountability, reporting

• In practical terms, corporate accountability now amounts to more than maximising shareholder profit

• For proactive and successful companies, it is about maximising stakeholder value – a different goal with a broader set of beneficiaries

• Inevitably, this involves the recognition of a triple bottom line that focuses on people and the planet as well as profit.

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The transition from the industrial economy to the sustainable economy

‘Responsible’ business?• BP and Shell issue CSR reports, but oil is to remain dominant

source of energy through to 2050

• BAE has announced it has a new range of environment-friendly weapons, including ‘lead free’ bullets, rockets with reduced toxins and grenades that produce less smoke

• BAT issues a Sustainability Report, but still contributes to the premature death of millions of people

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The Four Basic Principles of Corporate Citizenship

Organisations should be able to:

1. Articulate their role, scope and purpose;

2. Understand their social and environmental impact as well as their financial performance;

3. Be transparent and accountable;

4. Be in compliance.

Corporate Citizenship (1998 & 2003) McIntosh et al.

‘Corporate citizenship, like individual citizenship, is an idea which has both practical and ethical dimensions. A key feature of citizenship is that it involves a mutually reinforcing relationship between individuals and communities’.

Corporate Citizenship McIntosh, Leipziger, Jones and Coleman (1998)

‘Citizenship is defined as the rights and duties of a member of a country. Companies, as independent legal entities, are members of countries and can be thought of corporate citizens with legal rights and duties. All companies, therefore, are corporate citizens, but their citizenship performance varies just as it does for an individual citizen. But citizenship is more than a legal term, it is a political term – ‘active commitment, responsibility, making a difference’ (Drucker 1993).

Perspectives on Corporate Citizenship Andriof and McIntosh (2001)

http://www.flickr.com/photos/wolframburner

http://www.flickr.com/photos/wolframburner

Ethical workplace management systems certification (SA8000)

Sustainability management systems assurance (AA1000S)

Learning platforms based on international conventions on human rights, labour standards, environmental protection and corruption (UN Global Compact)

Standardisation of reporting on corporate financial, social and environmental reporting (Global Reporting Initiative)

Examples of CSR initiatives over last ten years

The UN Global Compact

www.unglobalcompact.org.au

The Global Compact asks companies to embrace, support and enact, within their sphere of influence, a set

of core values in the areas of human rights, labour standards, the environment, and anti-corruption

Human Rights

Companies are asked to:

1. Support and respect the protection of internationally proclaimed human rights; and

2. Make sure they are not complicit in human rights abuses

Labour

Companies are urged to:

3. Uphold freedom of association and recognise the right to collective bargaining.

4. Make sure they are not employing forced or compulsory labour.

5. Refrain from employing child labour.

6. Eliminate discrimination in their hiring and firing policies.

Environment

Companies are asked to:

7. Support a precautionary approach to environmental challenges.

8. Undertake initiatives to promote greater environmental responsibility.

9. Encourage the development and diffusion of environmentally friendly technologies.

 Anti-Corruption

10. Businesses should work against all forms of

corruption, including extortion and bribery.

The Global Compact’s ten principles in the areas of human rights, labour, the environment and anti-corruption enjoy universal consensus and are derived from:

The Universal Declaration of Human Rights The International Labour Organization's Declaration on Fundamental Principles and Rights at Work

The Rio Declaration on Environment and Development

The United Nations Convention Against Corruption

‘The Global Compact has explicitly adopted a learning approach to inducing corporate change, as opposed to a regulatory approach; and it comprises a network

form of organization, as opposed to the traditional hierarchic/ bureaucratic form’.

John Ruggie - UN & Harvard (2000)

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• The leader in the quest to develop internationally accepted standards for triple bottom line reporting is the Global Reporting Initiative (GRI) http://www.globalreporting.org/

• 1st draft of reporting guidelines (G1) was piloted by 21 companies during 1999-2000; 2nd version of the guidelines (G2) was released in 2002; Version 3 (G3) came out in 2006

• Since this time, more than 1500 companies worldwide have used the guidelines, making it the de facto global standard for reporting

Example: CasioJoined Global Compact in 2010

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Case Study:

“The good, the bad, and the ugly”

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• Which companies have a good record?

• Which companies have a bad record?

• Which are plain ugly?

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• A company that views CSR to be of key strategic importance

• A company that had reputational problems is trying to rehabilitate itself

• A company that has little or no interest in CSR

Consider, the evolution of CSR

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• The affordability of CSR in a highly competitive environment

• Can companies afford not to commit to CSR?

• Is there ‘good CSR’ and ‘bad CSR’?

• Is the sustainable enterprise a special case?

Some discussion points …

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Prepare a 10 minute presentation providing an example (and critique) of each

Go ahead… make my

day!