csr: origin, stakes and strategies

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CORPORATE SOCIAL RESPONSIBILITY & BUSINESS ETHICS

Session 1: Facing the Sustainabilitychallenges: Corporate Social Responsibility

François MANGIN2015-2016


Session 1

Facing the Sustainability challenges: Corporate Social Responsibility


Course learning objectivesBy the end of this course, students are expected to be able to:

Distinguish between CSR, Sustainable Dvlpt (SD) and Ethics In a given situation, identify the stakeholders, analyze their stakes,

positions, and resources and to propose a engagement strategy Present and explain the major tools and frameworks used to implement

more responsible and sustainable ways of doing business Make a CSR/SD diagnosis of a company in its industry and propose the

major lines of an action plan Explain the new sustainable and responsible Business Models Use a thoughtful approach to dealing with unethical situations in business; Present the key CSR issues currently on the national and international

agenda ; Critically assess companies’ CSR strategies and outcomes


Course schedule

1. The responsibilities of Business towards Society, and Sustainable Development

2. Stakeholders, controversies and lobbying3. Simulation4. Labor conditions5. Consumer issues and Fair operating practices6. Ethics: how to face unethical situations7. Environmental impact and Eco-design8. Sustainable and responsible Business models9. The challenges of developing less developed countries 10. Simulation


Session 1

Facing the Sustainability challenges: Corporate Social Responsibility


Session 1 Learning objectives

By the end of the session, each student is able to::

Situate CSR in the history of Business and Society relationships Explain the political and legal components of Sustainable

Development Explain how CSR is linked to Sustainable Development Explain the differences between European and American visions of

CSR Present the areas where the responsibility of a company can be

engaged Explain the CSR Business Case Use a Virtue Matrix to position and qualify the CSR/SD policy of a

company or a industry


Introductory Case Study

Who are the stakeholders?What are their stances and on which grounds do they defend them?


Stakeholders

VedantaOrissa Government

Local CommunitiesIndian government

NGO Medias

OCDE« Peoples »

Indian Supreme CourtShareholders

CSR Rating AgencyInvestors

Financial press


Worth to note:

• Non-economic impacts• Activist groups and supporters• Complaint filed before OCDE NCP• Legal actions• Involvement of financial institutions

– CSR research & rating agency– Responsible Investors

Project withdrawal

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Session 1 outline

1. Business in Society: a increasingly challenged legitimacy

2. Sustainable Development: challenging the established decision-makers

3. Corporate Social Responsibility: changing the corporation to make development more sustainable

4. Areas of Corporate Social Responsibility5. Corporate CSR policies

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1

Business in Society: a increasinglychallenged legitimacy

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1970: Milton FriedmanThe manager is the agent of the individuals who own the corporation

His unique responsibility is to make as much money as possible while conforming to the law

and to the ethical custom.

He has no expertise nor legitimacy to take decision in other fields than running his company

Social Responsibility is the responsibility of the government

Responding to CSR demands from pressure groups that didn’t succeed in electoral

competitionwould be non democratic

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North American approach (Carroll)

Philanthropic

Ethical

Legal

Economic

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Recent illustration

• Annual General Meeting 2011• CEO de Margerie answers a question on the Joslyn tar

sands field in Alberta (Canada) asked by an Athabasca Chipewyan first nation representative

• Link

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The capitalist systemis under siege.

In recent years business increasingly hasbeen viewed as a major cause of social,

environmental, and economic problems.

Companies are widely perceived to be prospering at the expense of the broader community.

The legitimacy of business has fallento levels not seen in recent history.

2011: Michaël Porter

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Synthesis:

• CSR origins lie in the USA where some questions arose about the missions of the corporation and of its executives.

• But the US tradition restricted the corporate social engagement to voluntary philanthropic activities.

• Criticisms against the negative impacts of corporate operations threat its legitimacy and put pressure on this too limited approach.

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2

Sustainable Development: challenging the established decision-makers

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Global challenges

Micro-levelcauses

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Causes of the unsustainable development?

No consideration of the long-term and distant impacts of decisions

AccountingFinance

No consideration of the advocates of the

interests affected by the unsustainable development

Lack of transparency

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SustainableDevelopment

Development that balances economic, social and environmental stakes and thus preserves the future of the future generations by:

• Implementing new ways of making decisions by addition of non-economic criteria and by engagement with new stakeholders

• Increasing the accountability of decision-makers by organizing data transparency as well as by modifying the legal environment to allow the prosecution of decision-makers

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Stakeholder

A person, group, organization:• whose interests are affected

by the decision• that has an influence on the

decision-making process

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Rio Declaration

Participative and transparent decision making process

Risk analysisImpact studies

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Rio Declaration

Implementlegal Frameworks

3 Principles– Responsibility– Precaution– Polluter Pays

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Precautionary Principle

The lack of sound scientific data, considering the present state of art, should not delay the adoption of effective and proportionate measures aiming at risk prevention against environmental, health or nutrition hazards.

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Polluter Pays Principle

Those who produce negative externalities should bear the costs of managing them to prevent damage to human health or the environment. Defined by OCDE in 1972Part of UE Treaties (1987)

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Synthesis:

• SD is not just a call to preserve the environment and the future generations

• It promotes the ways and means to achieve it :• A political change in the decision-making processes of

companies, local and national governments.• An enlargement of the decision-makers liability by

increasing transparency and easing prosecution• [It recalls the right of the South to pursue its

development too].

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3

Corporate Social Responsibility: changing the corporationto make development more sustainable

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To achieve sustainabledevelopment, a top priority:

Involve the business(in the whole world)!

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Legal levers(hard law & soft law)

ObligationsInterdictions

Liabilities and indictmentsDecision criteria &Decision making pocesses

Governance

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Soft law

instruments (guidelines, codes of conduct) which :• Aim to modify or to guide behaviors by the

voluntary adhesion of the participants ;• Do not have any legally binding force and do note

create legal rights or obligations;• Are elaborated and designed in a formalized way,

very similar to the process used for the rules of law.

From French Conseil d’État, Étude annuelle 2013

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From the soft to the hard law

Legal Obligation

JurisprudenceIndividual Pledge

Voluntary adhesion to a

Pact or Covenant

Voluntary Frameworks &

Guidelines

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Hard law & soft law: an example

CSR/SD ReportingPublishing the CSR/SD impacts andthe actions to prevent and to attenuate them

Mandatory for the large then the middle-sized companies… but no prescription of specific guidelines to do it

Ruled mandatory by the EU… since 80% of the targeted companies still willingly do it

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Economiclevers

Modify pricesTaxes

Create New Markets

SubsidizesPublic Investments

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Innovations

Management tools

TechnologiesBusiness Models

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Visions of CSR

DefinitionCore issues Means for action

Legal enforcement?National law?

Treaties and InternationalPrinciples & Declarations?

FrameworksGuiding actionsComparing outcomes

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What is CSR?

• “Corporate Sustainability is a business approach that creates long-term shareholder value by embracing opportunities and managing risks deriving from economic, environmental, and social developments.“

• CSR is a guiding vision that can help companies maintain their license to operate in an increasingly globalized world.

• d

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What is CSR?

• CSR is the continuing commitment by business to contribute to economic development while improving the quality of life of the workforce and their families as well as of the community and society at large.

• “A sustainable business is one that delivers value for investors, customers, and employees; improves the living standards of its employees and the communities it touches; makes wise use of natural resources; and treats people fairly.”

• d

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European approach of CSR

« the responsibility of enterprises for their impacts on society »

European Commission, 2011

“Being socially responsible means not only fulfilling legal expectations, but also going beyond compliance and investing “more” into human capital, the environment and the relations with stakeholders”

European Union, 2001

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Corporate SocialResponsibilityA process driven in close collaboration with the stakeholders,To integrate social, environmental, ethical, human rights and consumer concerns into their business operations and core strategy, with the aim of:

• maximizing the creation of shared value for their owners/shareholders and for their other stakeholders and society at large;

• identifying, preventing and mitigating their possible adverse impacts

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International

Conventions & Agreementsbetween signatory states

Guidelines for the Business

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Standard ISO 26000

Mandatory further reading on Moodle"Mieux comprendre la norme ISO 26000" in: Lecomte & Adary: L’ISO 26000 en pratique : Faire de la responsabilité sociétale un levier de performance pour l’entreprise , Dunod, 2012

• First international framework proposed for the design and implementation of the corporate CSR/SD policy

• A voluntary and non certifiable standard– No certification by a third party certification body– Preventing the risks of CSR/SD-based trade discrimination (towards

Southern countries products & services)

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Corporate socialresponsibilityThe responsibility of an organization for the impacts of its decision and activities on society and the environment, through transparency and ethical behavior that:

• Contribute to sustainable development, including health and welfare of society

• Takes into account the expectation of stakeholders• Is in compliance with applicable law and consistent with

international norms of behavior• Is integrated throughout the organization and practices in its

relationship

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Synthesis:

• CSR is the lever used to change and transform business practices towards more sustainability

• CSR expectations are more or less demanding depending the country and its national culture regarding Business & Society

• Even if the soft law approach is still dominant, legal constraints increase:• Criminal and civil liability (scope, fines & damages)• Accountability requirements

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4

Areas of CorporateSocial Responsibility

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Principles & Methodology

• Accountability– being answerable for decisions and activities and their

impacts on society, the economy and the environment– to the organization's governing bodies, legal authorities

and, more broadly, its stakeholders• Defining the Scope of action

– Explicit the specific CSR of the company– Identify company’s stakeholders and sphere of

influence

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Sphere of influence

« Area where, by its political, contractual or economic relationships, a company is able to affect the decisions or activities of companies, organizations or individuals. »

Area of power: the company's ability to guide the behavior and the activity of other actors, without jeopardizing their legal autonomy

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Human rights

Labour

Environment

Anti-corruption

Human rights

Labor Practices

Environment

Society

Economic

Products

Human rights

Labor Practices

Environment

Community involvement

Consumers

Operating practices

Governance

A larger and larger scope…

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… that gets very specific

Consumers

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… and requires more and moreaccurate and quantitative data

Society

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Case: impacts et influence of large retailers

Human Rights

Labor conditions

Environment

Communities

Consumers

Operating practices

Governance

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Synthesis:

• CSR is not simply about environmental management and philanthropy.

• The whole company is impacted, including its core business activities.

• Its responsibility can extend as far as the influence that the company can exert on other companies and other organizations.

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5

CorporateCSR policies

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CSR impacts on the company

OpportunitiesThreats

Protests against business practices

Lawsuits, Fines& Damages

New constraints

Costs increase

New segments & markets

Differentiation/competitors

NewBusiness Models

Sales increase and lower costs

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Compliance• Meeting new

constraints• Managing

new risks

Commitment• Reducing

externalities• Creating new

sustainable and responsible markets and business models

Two perspectives

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ComplianceCommitment

Up to what level?At what cost?

… For all competitors?

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Level playing field

Situation where all the competitors are playing by the same set of rules, with equal opportunities and constraints.• Eliminate the risk of social or environmental

« dumping » by competitors not subjected to the same rules and constraints

• Prevent unfair competition

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Business Case

Documented argument that justifies the company’s involvement in a project

• Cost of investment• Operating costs• Expected benefits and returns

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Top 3 reasons for CSR

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The CSR Business Case

Image& Réputation

Consumers and purchasersEmployees and applicantsInvestorsLocal and national government

BusinessB to B (responsible purchasing)B to C (responsible consumers)Green Business

RisqueAnticipating new risks, complaints and jurisprudences and regulationsLicense to operate

Finance Better risk managementAttracting responsible investors

Competitive Advantage

Innovation aimed towards rupture, reconfiguration, efficiency and frugalityDifferentiation and strategic shift

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The CSR Business Case

Mandatory further readings on MoodleInterview de Paul Polman, CEO Unilever, sur le changement climatique.

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Stakes and Impacts Assessment

Choice of areas for action

ProjectsObjectivesIndicators

Implementation

Control and Outcomes’

Measurement

Communication and CSR Reporting

The strategic process

Stake-holders

Stake- holders

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A responsible retailer?

Vidéo

Mandatory further readings on MoodleInterview de Serge Papin, PDG Système U sur les enjeux RSE de la grande distribution.

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The company and its CSR: The Virtue Matrix

Rational Commitment Radical Activism

Social mimetism Legal ComplianceRiskmanagement

Commitment

Martin R (2002) : "The Virtue Matrix: Calculating the Return on Corporate Responsibility".; HBR

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Why using the Virtue Matrix?To analyze and position CSR strategies• Position at a given time

– For a company• Position the CSR policy for each ISO 26000 core issue• Position the CSR policy for each country where the firm is operating

– For an industry• Position the industry’s competitors

– For a CSR/SD issue or for a country• Position each company, each industry or each core issue

• Dynamics of positions– Companies or industries– CSR/SD actions/tools: from commitment to compliance

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CSR/SD policies positioning

Rational CommitmentSocial Diversity

Eco-designPsychosocial risks

Dialogue with NGOs

Radical ActivismProduction relocalizationResponsible Supply Chain

Human RightsSustainable Business Models

Social ImitationDisabled employees

Carbon emission assessmentGender Equaility

Green sponsoring

Legal ComplianceWorkplace safety

Illegal employmentEnvironmentally-sensitive

facilities

Riskmanagement

Commitment

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Trivialization and Regulation

Rational Commitment Radical Activisme

Social imitation Legal ComplianceRiskmanagement

Commitment

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Synthesis:

• Facing CSR/SD challenges, a company can choose different positionings on each issue, considering the specificities of its industry and its operational activities.

• A genuine CSR/SD policy is based on:• a strong commitment on major CSR/SD issues• an actual dialogue with stakeholders• Feedback and corrective loops in case of CSR/SD dysfunction

or alert