Defining CSR
• “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.” (World Business Council for Sustainable Development, 2000)
• “Operating a business in a manner that meets or exceeds the ethical, legal, commercial and public expectations that society has of business”. (Business for Social Responsibility, 1998)
What is CSR
• Maximize company’s overall impact on the society and stakeholders.
• More than a collection of discrete practices or occasional gestures, or
initiatives motivated by marketing, public relations or other business benefits.
CSR approaches and attitudes differ largely due
• – to social and economic systems
• – legal and regulatory frameworks,
• – cultural practices,
• – local societal and public needs and expectations.
CSR
• “A business that does not show a profit at least equal to its cost of capital is irresponsible; it wastes society’s resources. Economic profit performance is the base without which business cannot discharge any other function, cannot be a good employer, a good citizen, a good neighbour. But economic performance is not the only responsibility of a business…Every organization must assume responsibility for its impact on employees, the environment, customers, and whomever and whatever it touches. That is social
responsibility.”
Values
— Values are the rules by which we make decisions about right and
wrong, should and shouldn't, good and bad. They also tell us which are more or
less important, which is useful when we have to trade off meeting one value
over another.
n :
beliefs of a person or social group in which they have an emotional investment
(either for or against something); "he has very conservatives values"
— Value
— Values are beliefs. But they are beliefs tied inextricably to
emotion, not objective, cold ideas.
— Values are a motivational
construct. They refer to the desirable goals people strive to attain.
— Values transcend specific
actions and situations. They are abstract goals. The abstract nature of values
distinguishes them from concepts like norms and attitudes, which usually refer
to specific actions, objects, or situations.
— Values guide the selection or
evaluation of actions, policies, people, and events. That is, values serves as
standards or criteria
— Values are ordered by
importance relative to one another. People’s values form an ordered system of
value priorities that characterize them as individuals. This hierarchical
feature of values also distinguishes them from norms and attitudes.
PLEASE READ ABOUT VALUE SYSTEM on the link
http://en.wikipedia.org/wiki/Value_system
Morals
— Morals have a greater social element to values and tend to have a
very broad acceptance. Morals are far more about good and bad than other
values. We thus judge others more strongly on morals than values. A person can
be described as immoral, yet there is no word for them not following values.
— Dictionary.com defines morals as:
— n : motivation based on ideas of right and wrong
Ethics
— Dictionary.com defines ethics as: A theory or a system of moral values
— Ethics tend to be codified into a formal system or set of rules
which are explicitly adopted by a group of people. So you have Medical Ethics,
Professional Ethics of Auditors etc.
— Value
— A value is a view of life and judgment of what
is desirable
— It is part of a person’s personality.
— Ex. Benign attitude to labor welfare is a value
which may prompt an industrialist to do much more for workers than what the
labor law stipulates. We have seen its culmination in the value system that
guided JRD Tata to create the toewnship Tata Nagar for its employees with
housing, hospital, parks, water, electricity
and guarantee of one job for next generation of the worker !
— Values- individual
vs organizational values
— Values are the embodiment of what an organization stands for, and
should be the basis for the behavior of its members. However, what if members
of the organization do not share and have not internalized the organization's
values? Obviously, a disconnect between individual and organizational values
will be dysfunctional.
— Values- stated vs
operating values
— Additionally, an organization
may publish one set of values, perhaps in an effort to push forward a positive
image, while the values that really guide organizational behavior are very
different. When there is a disconnect between stated and operating values,
it may be difficult to determine what is "acceptable." For example,
two of the Army's organizational values include candor and courage. One might
infer that officers are encouraged to "have the courage of their
convictions" and speak their disagreements openly. In some cases, this
does work; in others it does not.
Ten motivationally distinct, broad and
basic values are derived from three universal requirements of the human condition:
— needs of individuals as biological organisms,
— requisites of coordinated social interaction, and
— survival and welfare needs of groups.
Ten Types of Values
1. Self-Direction.
Independent thought and action; choosing, creating, exploring.
2. Stimulation. Excitement, novelty, and
challenge in life.
3. Hedonism. Pleasure and sensuous
gratification for oneself.
4. Achievement. Personal success through
demonstrating competence according to
social standards.
5. Power. Social status and prestige,
control or dominance over people and resources.
6. Security. Safety, harmony, and
stability of society, of relationships, and of self.
7. Conformity. Restraint of actions,
inclinations, and impulses likely to upset or harm others and violate social
expectations or norms.
8. Benevolence. Preserving and enhancing
the welfare of those with whom one is in
frequent personal contact (the ‘in-group’)
9. Tradition. Respect, commitment, and
acceptance of the customs and ideas that
traditional culture or religion provide
the self
10. Universalism. Understanding,
appreciation, tolerance, and protection for the welfare of all people and for
nature.
— A pattern of relations of conflict and
congruity among values
— An Example
— The pursuit of achievement values may conflict with the pursuit of
benevolence values - seeking success for self is likely to obstruct actions
aimed at enhancing the welfare of others who need one's help. However, the
pursuit of achievement values may be compatible with the pursuit of power
values - seeking personal success for oneself is likely to strengthen and to be
strengthened by actions aimed at enhancing one's own social position and
authority over others.
Formation of Values
— Personal Values are imbibed from Parents,
Teachers and Elders
— As individuals grow, values are adapted and
refined in the wake of new knowledge and experiences.
— Within an organization Values are imparted by
founder-enterpreneur or a dominant CEO ,
and they remain in some form , even long after the person’s exit.
— Ex. Formation of Values
What forges Tata group companies together ?
— J.R.D. Tata
I would call it a
group of individually managed companies united by two factors :
— Part of
larger group that carries name and prestige of TATAs and public recognition
of honesty and reliability-
Trustworthiness
— Another reason is metaphysical – There is an inate loyalty , a
sharing of certain belief, a pride in the fact that we are somewhat different
from the other.
Jamshedji Tata
Value and
Ethics
— Business ethics operate as a system of values
relating business goals and techniques to meet specific human need.
— A major task of leadership is to inculcate
personal values and a sense of business
ethics to the organizational members.
— At one end values and ethics shape the
corporate culture and dictate ways how politics and power will be used and at
the other end clarify the social responsibility in the organization
CSR Paradox !
in order to maintain a socially
responsible business model, companies should act a manner that will
benefit society. Conversely, in order to benefit society, companies should
act in a manner that benefitted themselves.
Theories
— Social Contract (Donaldson, 1982; Donaldson and Dunfee, 1999)
– There is a tacit social contract between the firm and society; the contract
bestows certain rights in exchange for certain responsibilities.
— Stakeholder Theory (Freeman, 1984) – Argues that it is in the
company’s strategic interest to respect the interests of all its stakeholders.
•
CSR (Carrol, 1979)
Firms have responsibilities to societies
including economic, legal, ethical and discretionary (or philanthropic).
Philanthropy to
CSR
— THE 21ST CENTURY IS PROVING A BOOM TIME for philanthropy, social
enterprise and corporate social responsibility (CSR). Two of the world’s
richest men, Bill Gates and Warren Buffett, are vying to give away their
fortunes. Innovation is blossoming in clean-tech and socially minded
businesses. And companies are increasingly boosting efforts in CSR as consumers
demand more ethically sourced goods.
— The former Microsoft chief executive is a prime example of a
corporate hero who has left the business world in order to focus on his charity
work. The hope is that he can foster the efficiency of the private sector in
his foundation, which focuses on global health challenges.
— Percy Barnevik, The former chairman and chief executive of
Swiss-Swedish engineering group ABB, and former chairman of drugs giant
AstraZeneca, has switched his focus from commercial interests to poverty relief.
To run Hand in Hand International, which
extends small loans to poor women, including women in the Indian state of Tamil Nadu
— Television, the internet, foreign travel and issues like the tsunami
have opened our minds to the fact that there are huge numbers of people who
don’t have the capacity to live like people with privileges !
CSR
— C.K. Prahalad of the University of Michigan’s Ross School of
Business, and Jeb Brugmann, a sustainable development specialist, highlight oil
giant BP’s arrangements with NGOs to distribute stoves in rural India and Dutch
bank ABN AMRO’s collaboration on microfinance in Latin America with ACCION
International, an NGO that is itself beginning to develop a multinational
business.
They wrote in the Harvard Business Review: “CSR started as a way for companies
to gather intelligence about NGOs and manage their reputations. It has wound up
providing them with the tools they need to pursue business opportunities in
untapped markets.”
— These corporations have recognised the business need to focus on CSR
and are increasingly formalising their activity in the area. More than 3,200
have signed up to a United Nations initiative known as the Global Compact.
— This was launched in 2000
after then UN secretary-general Kofi Annan challenged business leaders to join
an international voluntary initiative to support universal environmental and
social principles. But the scheme has been criticised for having no teeth.
Companies need only to sign up to ten broad principles, which many subsequently
ignore.
Key Drivers: NGO Activism
— Facilitators:
IT (esp Internet), media, low cost travel
— Boycotts, brand damage, influence legislation,
domino effect
— e.g. Shell in Nigeria, Exxon in Cameroon,
Sinopec in Sudan, Apparel Industry (Nike, Gap), GMO, Wood Products, etc.
Key Drivers: Responsible Investment
— Roots of:
South Africa Apartheid Divestment
— Significant size: US SRI = 2.3 trillion $ in 2005 or 10% of all
professionally managed investments
— Shareholder activism: shareholder resolutions; voting process
— Influence corporate reporting and disclosure
requirements
— New rules on CSR reporting
— Principles for Responsible Investment
www.unpri.org
— Investor opinion survey (IFC)
Key Drivers:
Litigation
— Foreign Direct Liability
— Alien Tort Claims Act (ATCA): human rights,
environmental rights
o
Unocal
Burma
o
Coca-Cola
Columbia
o
Rio
Tinto Papau New Guinea
o
Del
Monte Guatemala
o
The Gap
Saipan
o
Shell
Nigeria Other tools: RICO, False
Advertising
o
E.g.
Saipan ‘sweatshop’ cases; Katsky v. Nike
United Nations Initiatives
— UN Global Compact
— UN Principles for Responsible Investment
— UNEP Equator Principles
— ILO Tripartite Declaration of Principles concerning
Multinational Enterprises and Social Policy (MNE Declaration)
— UNHCHR Business and Human Rights
— UNODC Anti-corruption
— UNCTAD Corporate Responsibility
Reporting, World Investment Report
•
Defining CSR
•
“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.” (World
Business Council for Sustainable Development, 2000)
•
“Operating a business in a manner
that meets or exceeds the ethical, legal, commercial and public expectations
that society has of business”. (Business for Social Responsibility, 1998)
•
What is CSR
• Maximize company’s overall impact on the
society and stakeholders.
• More than a collection of discrete
practices or occasional gestures, or
initiatives motivated by marketing, public
relations or other business benefits.
• approaches and attitudes differ largely
due
•
– to social and economic
systems
•
– legal and regulatory
frameworks,
•
– cultural practices,
•
– local societal and public
needs and expectations.
•
CSR
•
“A business that does not show
a profit at least equal to its cost of capital is irresponsible; it wastes
society’s resources. Economic profit performance is the base without which
business cannot discharge any other function, cannot be a good employer, a good
citizen, a good neighbour. But economic performance is not the only
responsibility of a business…Every organization must assume responsibility for
its impact on employees, the environment, customers, and whomever and whatever
it touches. That is social
responsibility.”
•
Peter Drucker, The Daily
Drucker, (HarperBusiness, New York), 2004, p 126
•
CSR reconciles stakeholder
expectations
•
1.Meet customers’ legitimate
needs (Marketplace)
•
☺ Innovate, recognizig they have choices
•
☺ Provide products “fit for purpose”; safe to use and that do no harm
to the
•
environment
•
☺ Provide value for money; avoid rent-seeking behavior
•
2. Meet employees’ needs
(Workplace)
•
☺ Treat them with respect and dignity
•
☺ Recognize the importance of merit and reward performance
reinforcing fairness
•
☺ Give them fulfilling jobs that build self-respect
•
☺ Provide safe and pleasant working environments
•
☺ Allow appropriate work-life balance
•
3. Meet society’s needs
(Community)
•
☺ Pay fair share of taxes
•
☺ Recognize impact of “externalities” and mitigate them
•
☺ Protect the environment and the neighborhood from degradation
•
☺ Contribute to society
•
4. Meet shareholders’ needs
•
☺ Make sufficient profits to cover costs of Innovation and R&D, experiments and
mistakes, product launches
•
☺ Upgrades of plant, facilities and people
•
☺ Capital and shareholder expectations
•
Summarizing CSR drivers:
•
What business does the company
choose to
•
do? (30%)
•
• How does it go about doing
that business?
•
(60%)
•
• What does it do with the
money it makes?
•
– Build capacity (8%)
•
– Do philanthropy? (2%)
•
UN Global Compact and Social
Capital
•
Principle1: Businesses are
asked to
support and respect the protection of
international human rights within their
sphere of influence; and
•
Principle 2: make sure their
own
corporations are not complicit in human
rights abuses
•
Human
Capital
•
Labour:
•
• Principle 3: Businesses are
asked to 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.
•
Natural
Capital
•
Environment:
•
•Principle 7: Businesses are
asked to 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.”
•
Human
Capital
•
•Principle 10: "Businesses
should work
•
against corruption in all its forms,
including extortion and bribery."
CSR: In a developed country:
•
•governance,
•
•Business ethics,
•
•human rights and
•
• Environment
In a
developing country( India):
•
•Focus on nation building
•
•Socio-economic development
•
•Rural development
•
•Employment
•
•Education
•
•Health care
•
•Community support
•
The Prince of Wales
International Business Leaders Forum defines CSR on basis of four issues:
•
– corporate governance to
include reputation, transparency, accountability, and anti corruption;
•
– safety and environment which
comprises product/service safety, worker health and safety, local environment
quality ;
•
– access/development that
includes initiatives in education, health-HIV/AIDS, digital divide, enterprise
development, and;
•
– Human Rights that in labour
standards, security and
•
indigenous people.
•
CSR philosophies India
•
R Edward Freeman
Companies respond to the needs of stakeholders
– customers, employees, Stakeholder communities
•
Statist –J.L. Nehru
•
Liberal –Milton Friedman
•
Ethical-Voluntary commitment
by
•
Ethical companies to public
welfare- Gandhiji
•
Drivers of CSR
•
Values - a value shift has taken place within
businesses where they not only feel responsibility for wealth creation but also
for social and environmental goods.
•
Strategy - being more socially and environmentally
responsible is important for the strategic development of a company.
•
Public
Pressure - pressure groups,
consumers, media, the state and other public bodies are pressing companies to
become more socially responsible.
•
Corporate Benefits of CSR
•
Reducing
risks and operating costs,
•
Reducing
regulatory oversight by working closely with regulatory agencies to meet or
exceed guidelines,
•
Increased
appeal to investors and financial analysts.
•
Building a
strong corporate reputation, image and clout as well as strengthen brand
positioning,
•
Attracting
and retaining a motivated workforce,
•
Building
strong community relationships with organizations and agencies that can provide
technical expertise.
•
Strategic Partnerships
•
Partnership = new development approach
favoured by the multilateral and bilateral donor community, industry, public
and private sector organizations.
•
Advantages include pooling resources, building
respect and understanding between potential adversaries, and transferring knowledge.
•
Tri-sector partnerships requires business,
government and civil society to pull together complementary resources.
•
Stakeholder
Engagement
•
Stakeholders are individuals or groups who
have a vested interest in a company’s operations, who interact with a company
in one or more of its activities and whose co-operation or active involvement a
company needs for its ‘license to operate’.
•
Engagement methods include consultation
papers, perception surveys, stakeholder workshops, public and private meetings,
liaison groups and academic roundtables.
•
The overall success of the engagement process
will depend to a large extent on corporate communication.
•
Government
Support
a) Mandating - define minimum standards for business
performance.
b) Facilitating - provide incentives for companies to engage
with the CSR agenda.
c) Partnering - act as participants, convenors or
facilitators.
d) Endorsing - direct recognition of the efforts of
individual enterprises through award schemes or ‘honourable mentions’ in
speeches by top government officials.
•
Starbucks, USA
•
Starbucks,
USA
•
Entered into partnership with Conservation International in 1998.
•
The aim was to promote the adoption of
agricultural practices that are socially, environmentally and economically
sustainable.
•
Coffee and Farmer Equity Practices (C.A.F.E.
Practices) offer incentives to suppliers who demonstrate independently verified
performance of environmental and social criteria.
•
C.A.F.E. Practices has become a model for
addressing environmental and social concerns through a company's supply chain.
•
Statoil,
Venezuela
•
Statoil
ASA was a Norwegian petroleum company established in 1972, now part of
StatoilHydro.
•
Had negative experience involving human rights
issues in several countries, including Venezuela.
•
This
prompted its subsequent selection of human rights as a core value of its
business and the focus of its CSR program.
•
Statoil,
Venezuela
•
Partnered
with the United Nations Development Programme (UNDP), Amnesty International to
train local judges on basic human rights and the legal processes in 1999.
•
Statoil
made significant financial contributions for the training, but maintained a low
profile by monitoring progress rather than trying to control the programme.
•
The reformed judicial system in 2001 was
accompanied by new legislation with a stronger human rights focus and a new
penal code.
•
UNDP found the Venezuelan project as ‘a
best-practice case’, for possible replication in other countries.
•
Conclusions
•
CSR is an increasingly important part of the
business environment.
•
Companies developing and implementing their
policies must take the socio-cultural context into consideration.
•
CSR needs to be integrated in core business
strategies and should not be seen as an add-on.
•
CSR
is not a replacement for the rightful role of democratic governments to set
regulatory frameworks for the benefit of the society and their people.
