BSO 2 2006

Corporate Responsibility: 

Corporate Responsibility Dr Lance Moir June 2006

Structure: 

Structure What is Corporate Responsibility? Current Pressures Value and Corporate Responsibility The approach at Leading Companies

What is corporate responsibility?: 

What is corporate responsibility? The triple bottom line Economic Social Environment

Slide4: 

What is Corporate Responsibility? Behaviour & conduct/good governance Responsible impact on society Accountability & transparency Stakeholder engagement Reputation & risk management Socially responsible investment

The issues being addressed by CR: 

The issues being addressed by CR Supply chain Human rights Plant closures Charitable giving Work life balance Cause related marketing Environmental pollution Sustainability…… These mean different things to different firms

World-wide critical events and issues: 

World-wide critical events and issues 1970s Apartheid era South Africa - racial discrimination 1970s Nestle - marketing of breast milk substitute 1984 Union Carbide in Bhopal, India - environment 1995 Shell in North Sea (Brent Spar) - environment 1995 Shell in Nigeria (Ogoni) - distribution of resources 1996 BP in Colombia - security forces & complicity 2000 Mars, Cadbury, Hershey, Ivory Coast - child labour 2000 Chiquita, Del Monte etc., C. America - association 2000 Adidas in Pakistan - child labour 2002 Talisman in Sudan - complicity in repression 2000s Nokia, Motorola, Congolese Coltan - forced labour

Reasons for the focus on Business & Society: 

Reasons for the focus on Business & Society Globalisation - increasing trade Markets growing faster than social and political structures Sheer scale of business (51 of the top largest economic entities are corporations) Technology Growth of the internet and available data Increase of NGOs (non-governmental organisations) Increase in democracy Growth of SRI (socially responsible investing)

CR-related standards, guidelines and codes of conduct: 

CR-related standards, guidelines and codes of conduct Now over 300 external CR tools, guidelines and codes of practice Australian Criminal Code Act Caux Round Table Principles for Business CERES Principles EMAS Ethical Trading Initiative Forest Stewardship Council Global Reporting Initiative Global Sullivan Principles Humane Cosmetics Standard ICFTU Basic Code of Labour Practice Investors in People ICC Business Charter for Sustainable Development ISO 14001 OHSAS18001 PERI Reporting Guidelines Social Accountability 8000 (SA8000) South African Government Employment Equity Act Sunshine Corporate Reporting US Government Federal Sentencing Guidelines

The Global Compact: 

The Global Compact Human Rights Human Rights within sphere of influence Complicity with rights violations - repression & conflict Labour The right to collective bargaining & freedom of association Eliminate forced and compulsory labour To effectively abolish child labour To end discrimination in the workplace Environment To support a precautionary approach to the environment Promote greater environmental responsibility Encourage the diffusion of environmentally friendly technology Anti- Corruption Work against all forms of corruption, including extortion and bribery

What is corporate social responsibility?: 

What is corporate social responsibility? The traditional model Social responsibility Business Philanthropy in response to appeals for help from society and social investment in projects of long-term importance to the company This is the core activity of the company providing the goods and services society wants The benefits of business Investment Jobs created Taxes paid Goods & Services Technology transfer Import substitution Export earnings Development of suppliers Human Resources Development

Four-Part model of Corporate Social Responsibility: 

Four-Part model of Corporate Social Responsibility Type of Responsibility Societal Expectation Examples Philanthropic Ethical Legal Economic DESIRED of business by society EXPECTED of business by society REQUIRED of business by society REQUIRED of business by society Corporate contributions. Programs supporting community/education. Community involvement/improvement; volunteerism Avoid questionable practices. Respond to “spirit” of laws. Assume law is a floor behavior; operate above minimum required by law. Assert ethical leadership. Obey all laws; adhere to regulations. Environmental laws. Consumer laws. Laws affecting all employees. Obey Foreign Corrupt Practices Act. Fulfil all contractual obligations. Be profitable. Maximise sales revenue. Minimize costs (administrative, production, marketing, distribution). Make wise strategic decisions. Be attentive to dividend policy Source: Carroll (1979))

Carroll’s Corporate Social Performance Model: 

Carroll’s Corporate Social Performance Model Proaction Accommodation Defense Reaction Philosophy of Social Responsiveness Consumerism Environment Discrimination Product Safety Occupational Safety Shareholders Social Issues Involved Social Responsibility Categories Discretionary Responsibilities Ethical Responsibilities Legal Responsibilities Economic Responsibilities

The Three-Domain Model of Corporate Social Responsibility: 

The Three-Domain Model of Corporate Social Responsibility (vii) Economic / Legal / Ethical (vi) Legal / Ethical (iv) Economic / Ethical (iii) Purely Ethical (v) Economic / Legal (ii) Purely Legal (i) Purely Economic Source: Schwartz & Carroll, Business Ethics Quarterly, 2003

Categories in the Three Domain Approach: 

Categories in the Three Domain Approach Purely economic – Lockheed bribes / Andersen shredding Purely legal – tobacco health warnings Purely ethical – Merck donation of drugs Economic/ethical – sponsorship of arts Economic/legal – Chapter 11 of Dow Corning? Legal/ethical – Giving drugs at below cost to Africa? Economic/legal/ethical – WalMart stops selling cigarettes in Canada

Corporate Social Responsibility “Portraits”: 

Corporate Social Responsibility “Portraits” Economic Orientation (e.g., CEO of Acme of Co.) Ethical Legal Economic Source: Schwartz & Carroll, Business Ethics Quarterly, 2003 Legal Orientation (e.g, Legal Dept) Econ Ethical Legal Ethical Orientation (e.g., Consumers’ “Desired” Toy Co.) Balanced Orientation (e.g., Toy Industry) Econ Legal Ethical Ethical Econ Legal

How do firms look at CSR?: 

How do firms look at CSR? The World Business Council for Sustainable Development proposes a definition for CSR as: ‘the ethical behavior of a company towards society. ….management acting responsibly in its relationships with other stakeholders who have a legitimate interest in the business.’ and ‘CSR is 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.’

The Management of Corporate Responsibility: 

The Management of Corporate Responsibility Defensive (pain alleviation) Traditional (cost-benefit) Strategic - shifts business into a new direction. Thus part of corporate strategic intent Learning, innovation and risk management Zadek (2001)

Stakeholders: 

Stakeholders Anyone who affects or is affected by an organisation Freeman Primary stakeholders - those without whom org cannot survive shareholders, customers, employees Secondary community, environment, opinion formers Clarkson

Issues with stakeholders: 

Issues with stakeholders Stakeholder scanning and identification Stakeholder consultation Stakeholder engagement Approach depends on view of the organisation and the need for a relationship with stakeholders

Stakeholder Typology: One, Two, or Three Attributes Present (Mitchell, Agle & Wood): 

Stakeholder Typology: One, Two, or Three Attributes Present (Mitchell, Agle & Wood) POWER LEGITIMACY URGENCY 7 Definitive Stakeholder 5 Dangerous Stakeholder 3 Demanding Stakeholder 6 Dependent Stakeholder 4 Dominant Stakeholder 1 Dormant Stakeholder 2 Discretionary Stakeholder 8 Nonstakeholder

The Management of Stakeholders: 

The Management of Stakeholders Four strategies Reactive Defensive Accommodative Proactive Wartick and Cochran (1985) Depends on stage in life cycle Fits idea of resource dependency Jawahar and McLaughlin (2001)

The Management of CSR: 

The Management of CSR Medium term cost/ benefit incremental social policies operational issues Recent substantial change reactive ethical/ environmental issues protective - risk and reputation key Strategic - long term viability and competitive advantage -two forms scenario mapping and strategic planning (top-down) learning and innovation (bottom-up ) Lenssen 2001

Slide23: 

Customers Q Could you tell me, in your own words, what you think is meant by the term corporate social responsibility? Base: 2,099 GB adults, October 2000 Responsibility towards customers Responsibility towards local community Responsibility towards the environment Acting responsibility/ethically Responsibility towards employees Being profitable/successful Responsibility towards their shareholders Source: MORI

Slide24: 

Q When forming an opinion about a particular company or organisation, how important is it to you to know about their activities in society and the community? Most say it is important to reputation Base: 1,044 GB adults 16+ July - August 2003 Not very important Fairly important Very important Not at all important No opinion 1% 2003 % Important 82 Not important 18 Net +64 Source: MORI

Slide25: 

Protecting the environment Education Recycling Unemployment/re-training schemes Help for people with disabilities Job creation Top mentions -2 -5 +4 -1 -1 -2 0 Priority Activities Base: 2,026 GB adults 16+ (350 customers) Protection of the countryside Q Which areas do you feel it is extremely or very important that large companies contribute to or support? Change ‘02-‘03 + Source: MORI

Slide26: 

Employees Q Thinking now about the organisation that you work for, how important is it to you that your own employer is responsible to society and the environment? Base: 890 working GB adults 16+. 6% 33% 59% Very important Fairly important No opinion 1% Not very important Not all important 1% Source: MORI