CSR

AN INTRODUCTION TO

CORPORATE RESPONSIBILITY

AIESEC EuroXPro 2006

Prague

21 March 2006

George Starcher, President, European Baha’i Business Forum

•

AN INTRODUCTION TO

• CORPORATE RESPONSIBILITY

• Prepared for EuroXPro 2006

• 21 March 2006

• Prague

PURPOSE of this session :

. . . to further your understanding of corporate responsibility (CR) and to apply some of the basic concepts

STRUCTURE OF THIS PRESENTATION

• 1. What is Corporate Responsibility (CR)?

• 2. The “shareholder” vs “stakeholder” concepts

• 3. How do companies put this concept into practice?

• 4. What motivates companies to engage in CR?

• 5. The business case for CR.

• 6. SMEs are different.

• 7. Applying the concepts: What can I, We (NCs), They (AI)… do to deepen our understanding of CR?

1. WHAT IS CORPORATE RESPONSIBILITY?

• Definition 1: European Commission

• “a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis”

1. WHAT IS CORPORATE RESPONSIBILITY?

• Definition 1: European Commission

• “a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis”

• Definition 2: World Business Council for Sustainable Development

• “the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large.”

Definition 3: AIESEC

Òbusiness taking an active role in addressing

economic, social, and environmental issues at both

global and local community levels.Ó

CR is often used interchangeably:

Corporate Social Responsibility

Business Ethics

Sustainability

Sustainable Development

Triple Bottom Line

Business in Society

Stakeholder management

2. STAKEHOLDER MANAGEMENT

• Stakeholders are those parties impacted by the corporation and upon whom its ultimate success depends.

• Who are the major stakeholders in addition to investors?

Employees (managers, employees, families, retirees) Customers (direct and indirect) Business partners (suppliers, joint ventures, alliances) Communities (regional, national, local) Environment

Enterprise eco system: The stakeholder concept

EnterpriseEnterpriseEnterprise

Partners

Employ

eesCustomers

EnvironmentCommunitiesSup

pliers

3. HOW DO COMPANIES PRACTICE CSR?

First, several generalizations:

1. CR is fundamentally a vision or philosophy about the purpose 2. and role of business in society.

3. Practices vary by company, CEO, culture, and tradition.

4. CR is a journey and a process of continuous improvement.

5. CR is an investment in building an image and reputation.

6. CR makes good business sense.

CR is not:

Synonymous with Business Ethics

Limited to community involvement

Exclusive of environmental sustainability

Paternalism

Taking over the role of government

Employees / Workplace

• Quality of Life

Employees / Workplace

Quality of lifeHuman resource policiesResponsible restructuringHuman rightsDiversityJob creationTraining and educationHealth and wellnessHarassment

Customers/consumers

Ethical marketing Products and Services Customer service Responsible procurement Audits Cause related marketing

Suppliers

Codes of conductSupply chain management and monitoringHuman rightsLabour standards (ILO)Minority VendingFair Trade

Community Involvement

Volunteerism Education Poverty alleviation Philanthropy

Environment

Life-cycle management Greening the supply chain Pollution Public procurement Eco-Efficiency (recycling, consumption, ..)

Business Ethics Codes of conductEthical audits and training

Governance Mission/vision/valuesCorporate cultureInternalizing costs

Regulation GovernmentCivil

Related issue areas

REGULATION ETHICAL

ECONOMIC

WHAT DRIVES ETHICAL DECISIONS ?

4. WHAT MOTIVATES COMPANIES TO BE RESPONSIBLE?

Business success and competitiveness

Competitive advantage (ex: Cooperative Bank UK)

Ethical reasons: doing the right thing

Fad, peer group pressure

License to operate

Social purpose/mission

Examples:

Wal-Mart: increase fuel efficiency of trucks by 25% over 3 years (eco-efficiency)

Wal-Mart: audit supplier factories and reward them for environmental goals and cut emissions (responsible procurement)

Danone: closing factory in Mexico without layoffs or job loss (responsible restructuring)

Starbucks UK: employees volunteering on Christmas Day to support local homeless shelter; raising money for local causes (community involvement)

5. THE BUSINESS CASE FOR CR

• Hundreds of studies and articles indicate a correlation between good social and environmental practices and financial results, e.g.:

• CR vs share price performance• Good HR practices vs ROI• Low pollution vs PE ratios• Quality vs market share• Community involvement vs employee

motivation

5. THE BUSINESS CASE FOR CR

• Hundreds of studies and articles indicate a correlation between good social and environmental practices and financial results, e.g.:

• CR vs share price performance• Good HR practices vs ROI• Low pollution vs PE ratios• Quality vs market share• Community involvement vs employee

motivation

. . . but clear proof of cause and effect remains elusive.

Nevertheless it is generally accepted that

responsible practices do impact competitiveness

in a number of convincing ways:

Enhancing the ability to attract, retain and

motivate employees

Reducing costs

Increasing revenues

Building external reputation and brand image

Protecting the companyÕs Ôlicense to operateÕ

5. SMEs ARE DIFFERENT

• “CSR” is meaningless to SME owner/managers

The word “corporate” turns them off.

as does “social responsibility” to entrepreneurs preoccupied with their own survival and cash flow.

•The values of the owner/manager

•Cost savings (ex eco-efficiency)

•Supply chain/customer requirements

•Potential to increase revenue

•Attraction, retention and motivation of employees

Yet five major drivers lead entrepreneurs to act responsibly:

Certain types of SMEs are more

responsible

Enterprises with explicit social missions

Women owner/managers

Youth entrepreneurs

Family-owned businesses (legacy)

Cooperatives

Women deal differently with

stakeholders

o With employees: more meaningful work

o With customers: greater loyalty and

satisfaction

o With suppliers: longer relationships

o With local communities: more volunteering

6. LOOKING AHEAD

• CR will become more common practice.

• Public expectations of business will increase as the government role continues to diminish.

• There will be increasing demands for more transparency: “don’t tell me, show me”.

• Audits and annual social reports will become common, even mandatory in some countries

• CR will become a more strategic concern for management and be decentralized to business units

• New scandals involving business and government officials will focus increased attention on business ethics.

• New models will emerge for allocation of costs and benefits among companies, customers, and society.

• Raw material shortages and environmental degradation will limit growth and job creation.

• Treatment of employees will become even more important to win the “war for talent.”

• Business will seek more partnerships with government and NGOs to address major issues.

Sustainability

• 1987 Brundtland Commission: “the ability to meet today’s global economic, environmental and social needs without compromising the opportunity for future generations to meet theirs.”

• Dow Jones Sustainability Group Indes (DJSGI): “a business approach to creating long-term shareholder value by embracing opportunities and risks deriving from economic, environmental and social developments.””

• Michael Hopkins: Sustainable development means improving the quality of human life while living within the carrying capacity of supporting ecosystems.”