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CORPORATE SOCIAL RESPONSIBILITY IN

GLOBALIZATION

Dr.Gholamhossein DavaniChairman of Dayarayan Auditing &Financial Services Firm (RSMi Iran)

Member of High council of Iranian association of Certified Public Accountants (IACPA)

IMA,IIA,AAA,BAA,EAA,CAAA,AIA,CFE“ International Conference on Business Ethics in the Globalization Age"

Feb. 18-19th 2007 , Tehran-Iran

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Ladies & Gentlemen. I am very glad to have the

opportunity to speak at this conference, as it gives me the chance to stress the importance of the CORPORATE SOCIAL RESPONSIBILITY IN GLOBALIZATION.

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Population=6,525,000,000GDP= $43,920,000,000,000Oil Product= 79,650,000 (BBI/day)Oil proved reserve (BBI)= 1,349,000,000,000Purchasing Power Party (PPP)= $ 59,590,000,000,000Export= $ 10,320,000,000,000Import= $ 10,270,000,000,000Labor Force (Person)= 3,001,000,000Oil Consumption (BBI/Day)= 80,100,000Internet users= 1,018,057,389Telephone- mobile cells= 1,752,183,600Debt-external= $38,540,000,000,000Natural Gas- Proved reserves (Cu-m)= 174,600,000,000,000Natural Gas-Export (Cu-m)= 667,600,000,000Daily transaction= S 1,300,000,000,000 (60 times of industrial goods)CHIP= Clearing House Inter-banks Payment System Every Minutes 2 B.US Every day = $1,000,000,000,000Daily transaction= $ 1.300.000.000.000 (60 times of industrial goods)CHIP= Cleaning house inter banks payment system every minutes 2 B. US DollarsEveryday= $ 1.000.000.000.000

World at a glance 2006

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Telephone1,206,315,500

Internet users1,018,057,389

Airplane49,024

Roadway32,345,165KM

Railway11,115,205KMWorld’s import

10,270 Billion USD

World export10,320 Billion USD

Gas Proved Reserve174,600,000,000,000( Cu-m)

Gas Import828,000

(Cu-m)

Gas Exports667,600,000,000

(Cu-m )

Gas- consumption2,820( Cu-m)

Oil- proved reserve1,349,000,000,000( BBI)

Oil production 79,650,000( BBI/day)

Oil Consumption80,100,000

(BBI/day)

Oil export7,920,000Bbi/day

Labour force3,100,000,000

Mobile cell1,752,183,600

World at a glance 2006

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Outlook of world 2006

GDPOfficial

rate

Billion

ExportBillion

GDPPercentCurrent

price

GDPPurchas

e per

capital

Population

Oil productBBI/Day

Oil BBI/DayOil reserveGas reserve

World43,92010,32047,76659,5906,52583,000,00082,590,0001,326,000,000,000172,200,000,000,000

Euro13,3101,3184543512,1804863,172,00014,700,0007,335,000,0007,335,000,000

USA12,47092742,00012,4102987,610,00020,730,00022,450,0005,451,000,000,000

Japan4,84855030,7003,914127120,6005,353,00029,290,00039,640,000,000

Germany

2,7471,01629,8002,45482167,4002,650,00039,600,000279,100,000,000,000

UK2,21832730,9001,869602,075,0001,827,0004,500,000,000589,000,000,000

France2,06744330,0001,8226277,6901,977,000144,300,00012,770,000,000

China1,7907526,3008,1821,3133,631,0006,534,00016,100,000,0002,350,000,000,000

Iran178558,100552683,979,0001,510,000135,500,0026,620,000,000,000

India720773,4003,6691,095758,0002,450,0005,600,000,000835,000,000,000

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World Military expenses

USA518

China81

France45

Japan44

UK42

Germany

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India19

Iran4/3Source: CIA Fact book 2006

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DescriptionWorldUSAEUChina

Export(Billion $)10,3209271,318752

GDP(Billion $)43,92012,47013,3101,790

GDP (Per capital) PPP$

---42,00028,1006,300

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What is Globalization

Globalization as a decoupling of space and time, emphasizing that with instantaneous communications, knowledge and culture can be shared around the world simultaneously.

“Sociologist, Anthony Giddiness”

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The History of Globalization

Globalization is an historical process that began with the first movement of people out of Africa into other parts of the world. Traveling short, then longer distances, migrants, merchants, and others have always taken their ideas, customs, and products into new lands. The melding, borrowing, and adaptation of outside influences can be found in many areas of human life.

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Globalization in the era since World War II has been driven by trade negotiation rounds, originally under the auspices of GATT, which led to a series of agreements to remove restrictions on "free trade". The Uruguay round led to a treaty to create the World Trade Organization or WTO, to mediate trade disputes. Other bi- and trilateral trade agreements, including sections of Europe's Maastricht Treaty and the North American Free Trade Agreement have also been signed in pursuit of the goal of reducing tariffs and barriers to trade.

“Source:Wikipedia”

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World Great Transformation

Fire Discover Invention of Gun Invention of Printing Invention of Machine Invention of Computer Invention of Internet

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Arising New Globalization

Globalization is a process that has been going on for the past 5000 years, but it has significantly accelerated since the demise of the Soviet Union in 1991.

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Economically,socially, and ecologically negative:As an engine of "corporate imperialism";one which tramples over the human rights of developing societies, claims to bring prosperity, yet often simply amounts to plundering and profiteering. Negative effects includecultural assimilation via cultural imperialism, the export of artificial wants, and the destruction or inhibition of authentic local and global

community, ecology and cultures.

What is Globalization

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How Globalization Birth

Globalization is a relatively new term used to describe a very old process. It is a historical process that began with our human ancestors moving out of Africa to spread all over the globe. In the millennia that have followed, distance has been largely overcome and human-made barriers lowered or removed to facilitate the exchange of goods and ideas. Propelled by the desire to improve one's life and helped along by technology, both the interconnectedness and interdependence have grown. This increasing integration of the world or 'globalization' has enriched life but also created new problems.

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Timeline of Globalization

Age of Imperialism-1900Great Depression- 1929World Economic Forum (WEF)-1971

-1986 Dwellers landGeneral Agreement on Tariffs and Trade (GATT)-1986

Montreal Protocol-1987Fall of Berlin Wall-1989Collapse of Soviet Union-1990

Union European-1992Un World Conference on Human Rights-1993North American Free Trade Agreement (NAFTA)-1994World Trade Organization (WTO)-1995International criminal court-1998Euro adapted 12 countries -2002

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Effects of Globalization

World Governance E-governance E-trade E-bank E-learningVirtual Organization

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Des.20062005199019801950

GDP (Billion)47,77644,45422,72111,7414,285

Export (Billion)14,46412,6844,2562,408304

Import (Billion)14,28212,5854,2832,422309

Population (Billion)

6/56/45/34/42/5

Inflation% 3/83/726/116/913/2

Source: IMF

1-GDP, Export, Import, Population, and Scale is Billion

2 -GDP- Current price at US. Dollars

What does Globalization?

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Year 2000: 30 trillion – 5 billion people – 20%

global GDP Year 2050: 140 trillion – 8 billion people – 40%

global GDP (assuming 3.5% growth)

Global Gross Domestic Product (GDP)

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New world Discipline

The fall of the Berlin Wall and the collapse of the Soviet Union ended the cold war between the forces of capitalism and socialism with capitalism triumphant. The development of the internet made possible the organization of business on a global scale with greater facility than ever before.

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Economic effects of Globalization

Instability Economic-Increase risk

Development role of financial & monetary market

E-Trade development

Decrease raw material /increase product & services

Increase of services & support works

Product life cycle

Downsizing of economic entity

Changes in expenses structure

Intensive competition & consider important consanguineous advantage

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World CapitalismOne of the main sources of globalization is the view among activists that "international capitalism is nothing more than a byword for oppression, exploitation and injustice by rapacious multinationals. In their view, companies will stop at nothing to maximize profits even if it means degrading the environment, abusing workers, exploiting third-world markets and committing a host of other sins. “Social responsibility is defined as a framework of measurable corporate policies and procedures and resulting behavior designed to benefit the workplace and, by extension, the individual, the organization, and the community.

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International business

Multinational companies face special issues in relation to ethical auditing. It is, though, precisely these special issues which can make ethical auditing so valuable to multinationals. Executives of such companies are well aware of the added complications which operating across a number of cultures brings. But problems tend to multiply when differing value bases are permitted to take hold within different cultures. It may have seemed acceptable for Shell to apply differing environmental standards to their drilling in Ogoniland decades ago to those they applied in Europe or North America - but in an era of acute global consciousness of the interdependence of the world

eco-system the same standards are rightly expected in every continent.

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Importance of Ethics

“There is no such thing as business ethics….There’s just ethics; and we all have to practice them every day in everything we do.”

Peter Drucker

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Social Responsibility

The currency and general relevance of social responsibility and sustainable development (SR/SD) to society is seen in such areas as investor interest in ethical mutual funds, government lists of threatened or endangered species, and pollution control mandates established by public policy setters. Indeed, business, government, and society are caught up in a debate over how this planet’s scarce resources are to be preserved and used.

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What are SR/SD

These are voluntary initiatives with a global constituency that can also be defined as multi-sect oral, in that they can be applied in a wide range of industries. They have all evolved through social partnerships involving some elements of business, governments, labor organizations and non-government organizations. They all take a multi-stakeholder approach to corporate citizenship issues.

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Social responsibility

• Community• Diversity• Environment• Ethics• Financial Responsibility• Human Rights• Safety

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The Global Eight

1-The UN Global Compact

2- ILO conventions

3- The OECD Guidelines for Multinational Enterprises

4- ISO 14000 Series

5- Accountability 1000

6- The Global Reporting Initiative

7- The Global Sullivan Principles

8- Social Accountability 8000

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Accountability

The objective of accountability towards stakeholders requires information about general issues such as product safety, the environment, employee relations, etc. An ethical bookkeeping system collects data systematically about the organization's ethical behavior, which is relevant for stakeholders. This process is most likely to include "hard" information, including for instance complaints of stakeholders, business accidents or fines for unethical behavior .

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Corporate Governance

The good corporate governance needs to address not only boards of directors, committees, and legal and regulatory issues, but also business practices and ethics, disclosures and transparency, enterprise risk management, monitoring, and communication. That it's a whole set of systems and processes.

“It's not just narrowly focused on compliance with Sarbanes-Oxley.”

Sustainability…

“Sustainable development is a very

simple idea. It is about ensuring a better quality of life for everyone,

now and for generations to come”.

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Sustainable Company

The systems and processes of corporate governance also should consider a diverse group of stakeholders, not solely shareholders. "Most corporate governance focuses just on shareholders. But a shareholder's interest is different than an employee's interest, which is different than the interest of a community, creditor, or supplier. And too often, the focus of shareholders, management, and everyone else in the company is on increasing shareholder value .

Furthermore, this responsibility is often on the backs of the community or the employees or the suppliers, and that is not in their interest.

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It is possible for standards to have several of these characteristics:

• Principles (Global Compact and Global Sullivan Principles)

• Standards (GRI, OECD Guidelines, SA8000, AA1000S, and ILO Conventions)

• Foundation (ILO Conventions, AA1000S)

• Process (SA8000, AA1000S, ISO 14000S)

• Performance (SA8000, OECD Guidelines, and ILO Conventions)

• Certification (SA8000 and ISO 14000 Series)

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History of Global Reporting

The Global Reporting Initiative (GRI) was conceived in 1997 by the Boston-based Coalition on Environmentally Responsible Economies (CERES) in collaboration with the Tells Institute. Over the past five years, the GRI has evolved into a set of reporting criteria on all aspects of a company’s performance. The initial draft standard was ‘field-tested’ in 1999 by over 20 companies and released in June 2000. A revision was published in 2002.

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What is GRI The GRI has been adopted by the UN Environment

Programmed (with funding from the UN Development Fund) and is becoming an independent organization. The GRI is built on a simple premise. By providing a broadly-agreed mechanism, reached through negotiation between the partners in the process, to measure environmental and social performance, the GRI aims to assist investors, governments, companies and the wider public to understand more clearly the progress being made towards sustainability. The use of a common framework is seen as a way to improve related analysis and decision making.

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Elements of SR/SD

Each initiative is described below and compared with the others. Many of the initiatives have a common starting point: either convention of the International Labor Organization (ILO) and/or The UN Declaration on the Rights of the Child and/or the Universal Declaration on Human Rights. Most of the ‘Global Eight’ reflect a northern perspective. This is balanced only partially by the inclusion of ILO conventions, which are developed in a multilateral setting. While there are standards developed in the South, they tend to be national and/or regional in application.

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SA/CSR

After Enron Clops some terminologies same Social audit (SA), corporate social responsibility (CSR) have been relief. These days, corporate social responsibility (CSR) is common currency but a “currency” that is rather devalued. The phrase is so over- and poorly used that it begins to lose any meaning. Any proper definition of CSR would require a categorical standard of values. This is lacking. In fact CSR now means many different things to many people.

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Community Investment in its local community. Policies include partnerships

with voluntary local organizations, with financial donations, donations in kind (computers for education, food and clothes for the poor), and employees involvement. The company may initiate or participate to a major project such as the regeneration of a poor neighborhood plagued with unemployment, poverty, low education and racial tensions.

“The Community Policies will not only create roots in a local base for the company, it will also increase the productivity of the work force involved in the projects (by developing their leadership and customer service skills, building pride and loyalty with the feeling of being useful).”

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Environment Monitoring and reduction of the damage caused to the environment. For instance, policies of reduction of emissions and waste.

“The Environmental Policies will attract customers interested in the protection of the environment, and investors who fear the risks linked to bad environmental practices, while sometimes reducing the costs with cost-effective modifications of production processes. As for most other components of the Social Policy, serious Environmental Policies will attract Socially Responsible Funds and a qualified workforce (nobody likes polluters!).”

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Ethics

Values the company vows to respect. Policies include the pledge not to participate in (nor engage in business with people involved in) a series of activities that are deemed offensive. This list of unacceptable activities often includes exploitation of children, unethical treatment of animals, damage to the environment, and dealings with undemocratic regimes or with "bad guy" industries (fur, tobacco, guns, etc.).

“The Ethics Policies will attract long-term investors, increase market shares for the ethical product, strengthen partnerships, and make the employees proud”.

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Human RightsMaking sure the company does not violate human rights nor appears as supporting human rights violators.

“The Human Rights Policies, also, will attract Socially Responsible Funds and a qualified workforce. Its most important role, however, is defensive: to prevent boycotts or campaigns of protest that could seriously tarnish the reputation of the company accused of practicing (or being an accomplice of) human rights abuses, and the resulting falling stock prices, loss of market shares, and low-moral work force.”

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LaborCreation of a working environment allowing all employees to develop their potential. Policies include training, career planning, remunerations and advantages, rewards linked to merit, balance between work and family life, as well as mechanisms that ensure non-discrimination and non-harassment.

“The Labor Policies will attract and keep a qualified workforce, and increase productivity, while opening new markets (ethnic minority customers are sensitive to the anti-discrimination policies in the work place).”

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Society Investment or partnership beyond the community. For

instance, Cause Related Marketing (partnership with a charity to market a product while giving a small percentage of the sales to the charity).

“The Society (or Extra-Community) Policies boost not only the products linked with the policy but also the image of the company. Cause Related Marketing is extremely appreciated by customers because it makes them feel good (allowing them to support charities without spending their time or money), as long as the charities are well chosen and the percentage is not too small (or the ceiling too low).”

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Compliance Identification of all legal obligations and of the means to

comply. Policies must deal with changing rules related to its work force (Labor), its products (Health, Environment, Intellectual property, specific regulations), its administration (Business, Tax), its dealings (supplier and customer liability, Criminal actions).The phenomenal growth of Socially Responsible Funds (now 20% of funds invested in the US), the growing difficulty to attract qualified employees, and the rise of non-governmental organizations able to sue or boycott unethical businesses, demonstrate the vital importance for any business of a well designed Social Policy.

“The Compliance Policies are part of the Social Policy for two reasons. First, by complying with the law, the company demonstrates it is socially responsible. More importantly, Compliances Policies often go beyond the legal requirements, in order to show concerns for social matters (health, labor, environment, etc.).”

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The ILO has defined core Labor standards, which include:

Freedom of association (Convention 87)

Right to collective bargaining (Convention 98)

Prohibition on forced Labor (Convention 29 & 105)

Prohibition on child Labor (Convention 1959)

Freedom from discrimination (Convention 111)

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Social Responsibility

In the globalization area auditors' responsibilities have changed to corporate social responsibility that main basic is related to Ethics. Although many auditors are burning the midnight oil to familiarize themselves with the new regulations and to prepare for their role in the compliance process, the scope and complexity of change has made the learning process a significant challenge.

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Creation of a Social Policy

    Most companies (if not all) already have elements of Social Policy. Often, these are independent pieces of regulation and practices. Most of the time, they are not part of a unique strategy, they are not managed by powerful senior executives, they are not reviewed before any business decisions are made, and they are not used in ways that would produce their full benefits.

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Principles and standards

The Global Eight may be divided into principles and standards.

Principles are a set of overarching values that underpin behavior, and so by their very nature are non-specific in behavioral terms.

Standards are specific and advocate a set of benchmarks to be attained. There are several different types: process, performance, certification, and foundation:

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Standards Stage

Process

Performance

Foundation

Certification

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Process

Process standards define the procedures a company should put in place, such as how to conduct stakeholder dialogue, how to communicate with stakeholders or to develop management systems.

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INTERNATIONAL COVENANT ON ECONOMIC,SOCIAL AND CULTURAL RIGHTS

self-determination wages sufficient to support a minimum standard of

living equal pay for equal work equal opportunity for advancement form trade unions strike paid or otherwise compensated maternity leave free primary education, and accessible education at

all levels copyright, patent, and trademark protection for

intellectual property

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Process standards define the procedures a company should put in place, such as how to conduct stakeholder dialogue, how to communicate with stakeholders or to develop management systems.

Performance standards define what a company should do or not do, such as pay a living wage or prevent discrimination.

Foundation standards seek to lay the foundation for a new field, describing what constitutes best practice in an emerging area.

Certification standards establish a system under which certificates of compliance are awarded to companies that comply and have passed an independent (third party) audit.

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Sources

1- Auditors’ responsibility on globalization PPT Gh. Davani.2006

2- Stockholder Engagement standard, Institute of Social & Ethical accountability.

3- GRI and the transparency imperative, why GRI, global reporting initiative.

4- Living corporate citizenship by persons education Ltd.http://www.business-minds.com5- Corporate social responsibility & the global sullivan

principle.6- Ethics after Enron: PPT. Where are we, and where are we

going, University of San Diego 2003.7- The world fact book www.cia.gov8- IMF- www.imf.org

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