CSR INTRODUCTION

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.

—  Dictionary.com defines values as:

 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.