Creating Value via Corporate Social Responsibility

Bradley Googins, Philip Mirvis, Mary Jo Hatch

Traditional View

3

Global Executives On Role Of Business

84%

16%

Which of the following statements best describes the role

that large corporations should play in society

Generate high returns to investors but balance with contributing to the broader public good

Focus solely on providing highestpossible returns to investors while obeying all laws and regulations

Source Dec 2005 McKinsey Quarterly survey of 4,238 global business executives

4

5

What is the meaning of CSR?

Source: Fleishman Hillard/National Consumers League study,

“Rethinking Corporate Social Responsibility”

6

Societal Views of Large Corporations

Around the world...

Trust

10-20%

Expectations

60-70%

Sources: GlobeScan, Wirthlin, Edelman

7

Expectations are high for Business

Companies “Held Completely Responsible for,” Average of 25 Countries

2t. I am going to read a list of things some people say should be part of the responsibilities of large companies. For each one, please tell me to what extent you think companies should be held responsible. In answering,

please use a scale of 1 to 5, where 1 is “Not held responsible,” 3 is “Held partially responsible,” and 5 is “Held completely responsible.” What about…?

9

Stages Of Corporate Responsibility

Stage 1: Compliant

Stage 2: Engaged

Stage 3:Innovative

Stage 4: Integrated

Stage 5: Transforming

CitizenshipConcept

Jobs, Profits & Taxes

Philanthropy, Environmental Protection

Stakeholder Management

Sustainability or Triple Bottom Line

Change the Game: Business in Society

Strategic Intent

Legal Compliance

Reputation Business case Value Proposition

Market Creation or Social Change

Leadership Lip Service,Out of Touch

Supporter,In the Loop

Steward, On Top of It

Champion, In Front of It

Visionary, Ahead of the Pack

Structure Marginal:Staff driven

FunctionalOwnership

Cross-Functional Coordination

Organizational Alignment

Mainstream:Business Driven

Issues Management

Defensive Reactive, Policies

Responsive, Programs

Pro-Active, Systems

Defining

Stakeholder Relationships

Unilateral Interactive Mutual Influence

PartnershipAlliance

Multi-Organizations

Transparency Flank Protection

Public Relations

Public Reporting

Assurance Full Exposure

Brands feel the impact as activists target customers Financial Times

Brands feel the impact as activists target customers Financial Times

CSR from OUTSIDE IN

To be more responsible….

Success in tomorrow’s markets means working with stakeholders to understand, predict, and shape our future environment and ways of living. Tackling important problems together will require teamwork and respect.”

Jeff Immelt

Current CEO,

General Electric

Socially Responsible Business Models

Base of the Pyramid,

Micro-Finance,

Eco-Effectiveness

CSR Partnerships

Cheap Labor/Sourcing,

Obesity/Consumerism,

Environmental Damage,

Bribery

Nationalization

Access to Medicine

Access to Credit

Piracy

Climate Change

Digital Divide,

Youth Unemployment,

Corruption

SOCIETY

BUSINESSS

Opportunity

Risk

Source: Beyond Good Company

Risk Opportunity

Business And Society: Risk And Opportunities

Revolutionary Renewal

Strategic activities contribute both to repairing and also to building

society and environment

Sustainable Enterprise

All functions and actions are sustainable in economic, social and environmental terms

Social Responsibility

Society and environmental initiatives are integral to strategy – “do good”

Compliance & Disclosure

“Do no harm”Act within legal and ethical

codes of conduct

Benefit to Business

Benefit to Society

Zone of Mutu

al Benefit

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Leadership development

Adaptability

Long-term strategic view

License to operate

Supply chain/security of supply

Regulatory risk

Reputational risk

Workforce efficiency

Operational efficiency

Reputation/price premium

New markets

Reputation / differentiation

Innovation

New customers/ market share

New products

Management quality

Risk management

Return on capital

Growth

CSR creates financial value along 4 dimensions

▪ Novo Nordisk: Earned market leadership in China with market share above 70%

▪ Verizon: Increased sales by $6 million, with potential growth of a new market of over $600 million

▪ Dow: Invested $1 billion over 10 years to reduce its energy consumption and improve its efficiency and has saved $7 billion in last 5 years

▪ IBM: Improved global leadership skills, employee retention and commitment to IBM, new knowledge and skill contribution to IBM

▪ Nestlé: Earned $4.5 billion in 2007 through the sales of PPP (Popularly Positioned Products)

Source: Mirvis/McKinsey Study

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Although many companies create value from ESG, very few assess the financial value creation and even fewer communicate that to the markets

Percent of companies interviewed = 100%

-40%-40%

-5%-5%

-40%-40%

-10%-10%

ESG program

Maximizing value from ESG

Established metrics to monitor program

Converting ESG metrics to financial value

Communicate ESG value to CFOs, investors

Creating value Assessing value Communicating value

Source: BCCCC/McKinsey Study

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The Role of Citizenship on Corporate Reputation 11 March 2008

2323

J&J Partnership with the American Association of Colleges of Nursing

Linking Johnson & Johnson with: Caring, Education, and Hospitals

Key Drivers Standing behind products and services Vision for the futures Supporting good causes Meeting needs

Corporate Branding and CSR

Brilliant! Bullshit!