final revision lecture, birkbeck, may 13 2010

1. Corporate ResponsibilityRevision Lecture Birkbeck, May 13 2010 Toby Webb, Ethical Corporation Exam time and date: 7th June at 2.30 4.30pm

Druckerwas one of the first to explicitly address CSR, as one of the eight key areas for business objectives developed in his 1954 book, The Practice of Management

"The social responsibility of business encompasses the economic, legal, ethical, anddiscretionary expectations that society has of organizations at agiven point in time ". ( Carroll , 1979)

There is one and only one social responsibility of businessto use itsresources and engage in activities designed to increase its profits solong as it stays within therules of the game , which is to say, engage inopen and free competition, without deception or fraud.(Friedman 1970)

Scandals in the 1950s and 1960s over chemicals

Increasing wealth in the 1960s in Europe e.g. Sweden

Late 1960s and early 1970s activism hits temporary peak.

Earth Day 1970, publication of the Limits to Growth report, Erlich's Population Bomb

1980s also saw inner city riots in the UK

1980s env. cases: Barclays, Bhopal, Exxon Valdez

1990s saw Nike emerge as a modern case study

Shell and Brent Spar and Nigera (1995)

Body Shop values report (1995)

Late 1990s No Logo, Seattle WTO riots

Jubilee 2000 Campaign on African debt

2002 Johannesburg Summit on Sustainable Development,

2001 scandal over HIV / Aids drugs distribution in Africa

2003/4 Chinas economic explosion significant

Since 2003/4 CSR has become CR and SUSTAINABILITY

UN Global Compact / UN PRI Get CEOs signed up, but lack real teeth and bite!

GRI Useful place to start, danger of reliance on box ticking

John Ruggieswork Likely to impact business lobbying on better governance in future

Carbon Disclosure Project increased information for regulatory powers to use. May be more useful for legislation purposes than for carbon traders

EITI / Kimberly Case studies of real success but hard to replicate in areas where issues are more complex

ISO 26,000 very hard to standardise subjective issues for business!

Issue specific collaborations : Rainforest Alliance / Fair trade / cocoa / fish / timber / palm oil / soy / cotton / labour standards incredibly influential in terms of policy and even tier 1 supplier concerns

CSR Beginnerone-way communication , lack of a dialogue with stakeholders which are even not clearly defined (business partners and clients). Lack of CSR strategy.

CSR Pretendertwo-way asymetrical communicationmodel with reactive nature if there is a need one. A company tries to control its environment, image is very important. Stakeholders defined as: employees, clients and local community, their priorities are not clearly identified.(CSRStrategic philanthropy model ).

CSR Pioneertwo-way symmetrical communication with particular stakeholder groups,constant dialogue based on stakeholder engagement, mutual benefits (Stakeholder CSR model). This communication model can lead toCSRinnovation model within business and society as well as to a newCommunity PR model .( Kuraszko, I. (2009) Public relations and Corporate Social Responsibility PHD Dissertation. University of Warsaw)

The virtuous pyramid:

CSR innovation .

A company understands its role in society

- and wants to develop opportunities

Stakeholder CSR model.

PR/CR is focused on building relationships

Strategic philanthropy model themain purpose of CR/PR is building image

Hollender, J., Breen, B. (2010) The Responsibility Revolution (Jossey-Bass) (ps.109-11)

Four types of green pretenders:

The Shape Shifter : Greens image without changing its essence:BPand Beyond Petroleum. Clashed with: oil spills in Alaska, explosions in Texas and investments in Canadian Tar Sands

The Propagandist : Blunts genuine bad news with fake good news.Chevronand Ecuador. Company used independent ex-CNN journalist to make real-looking mockumentary presenting their side of the story

The Incrementalist : Hypes narrow, eco-friendly efforts without changing core, eco-unfriendly business.Clorox : Bought and produces some eco friendly products, but is mainly a bleach company promoting some products as if any stronger would be banned in 12 states.

The Double Talker : Puts serious marketing and R&D into green, but profits from pollution and undermines progressive regulation.General Electric : Launched Ecomagination, products and services that deliver sustainability improvements of at least 10%. $2.5 billion investment. But the company continues to try and weaken anti-smog rules for locomotives, fights mandatory CO2 cuts

Huge proportion of spend on OECD country procurement from

Government buying services, products

Desire to cut carbon emissions in business = requirements for

large suppliers to demonstrate some progress. E.G: CDP, CRC

Denmark : All listed companies (1000 approx) must mention CSR in annual reports

Sweden : All Government-owned companiesmust use GRI framework for reporting

Taiwan : Financial Supervisory Commission says all listed firms must disclose progress on social responsibility

UK Carbon Reduction Commitmentdeveloping CO2 allowances for all UK firms spending more than 1,000,000 a year on electricity (2010, capped from 2013)

Prahalad and Hart :

Target the 4 billion people living on less than $2 per day (1998) or 3.1 billion

living on less than $2.50 a day (Ethicalcorp 2009)

Later expanded by:

Prahalad (2004) The Fortune at the Bottom of the Pyramid

Hart (2005) Capitalism at the Crossroads

Prahalad :

Stop thinking of the poor as victims

Start seeing them as resilient and creative entrepreneurs

As value-demanding consumers poor of today are middle-class of tomorrow

Considers poverty reducing benefits in capacity building

CSR: Innovation and opportunity, key writers:

Hart suggests: focus on poor asbusiness partnersandinnovators , rather

than just as potential producers or consumers.

Hart'sBase of the Pyramid Protocol : business partnerships with income-poor

communities "co-create businesses and markets that mutually benefit

the companies and the communities".

Adopted by the SC Johnson Company and Solae Company (subsidiary of DuPont)

Aneel Karnani (2007) says no fortune at the bottom of the pyramid!

Says for most multinational companies the market is actually very small.

Karnani suggests only way to alleviate poverty is to focus on the poor asproducers , rather than as amarketof consumers.

CSR: Innovation and opportunity, key writers:

Microcredit : 5.8 million borrowers, small loans averaging $120 (bopnetwork.org 2006)

ITCande-Choupals : (village squares wired up) small farmers check market trading price of produce and sell it directly to ITC.

Farmers andITChave increased their revenues, efficient communication between buyer and seller

( Microsoft andHP do similar work in countries such as India via rural communications centers: more philanthropic and political)

Hindustan lever : Shampoo that works well with cold water in small sachets

Further BOP examples:

Companies all said for years employees arenumber one driverfor CSR (KPMG 2004)

2006 Mori survey found58%of employees in the UK thought the social and

environmental responsibilities of their organisation were important.

50mis given to charities each year through theGive As You Earnscheme, the most popular of such initiatives

Analysis suggests employees' perceptions of corporate social responsibility have a major impact onorganisational commitment .

(Brammer and Millington, University of Bath School of Management 2006)

CSR is cheaperthan pay rises, may help in a recession...

Opportunity: Employees and CSR

New opportunitiesfor products: Certification, Wind turbines, industrial technology (i.e. Unilever, Kraft, Mars, Cadbury, GE, Siemens, Toshiba)

Preferred partnerfor leading companies: Big firms expect more

Supporting diversesupplier base, develop loyal SME suppliers

Increased likelihoodof government contracts: Over time

Closer and more trustedrelationshipswith customers, NGOs

CR and modern business development :

Universal Declaration on Human Rights

All human beings are born free and equal in dignity and rights. They are endowed with reason and conscience and should act towards one another in a spirit of brotherhood

Adopted by UNGA, 10 thDec 1948

Response to Holocaust

Convention on the Rights of the Child

the United Nations has proclaimed that childhood is entitled to special care and assistance

Adopted by UNGA, 20 thNov 1989

International Labour Organisation conventions

The UN specialized agency which seeks the promotion of social justice and internationally recognized human and labour rights

Many of them, however, the fundamental 8 cover:

Freedom of Association

87: Freedom of Association and Protection of the Right to Organise Convention, 1948.

98: Right to Organise and Collective Bargaining Convention, 1949

The Abolition of Forced Labour

29: Forced Labour Convention, 1930

05: Abolition of Forced Labour Convention, 1957

Equality

100: Equal Remuneration Convention, 1951

111: Discrimination (employment and Occupation) Convention, 1958

The Elimination of Child Labour

138: Minimum Age Convention, 1973

182: Worst Forms of Child Labour Convention, 1999

Core Coalition and others have called for international regulation of companies in relation to human rights

Seems sensible?

Would provide clarity and uniformity

If its important, regulate.

Ignores complexity of international law

International regulation not a realistic option except in the long term

There is no such thing as a global government

Nearest equivalent is UN

International law therefore not a realistic option

UN Process

Negotiation at UN level

Adoption of Convention at UNSC

This is then the beginning of national processes

Adoption of the UN Convention into national law

This then supposes the national law is rigorously implemented

Look at International Criminal Court (ICC)

Pressure since 1975

Formally adopted 1988

Final incorporation 1998

Comes into operation 2002

China, America and others still not party to it.

Operational

How companies address these issues in their own operations

Relativelystraightforward

Many still fail to act, however

Strategic

More problematic

A political issue

Who he?

Former UN Deputy Secretary-General

Currently Professor of International Relations at KSG, Harvard

Comes from Realist background, and has huge insight into how things work

The mandate

UN Secretary-Generals Special Representative on Business and Human Rights

Mandate from 2005, extended last year for a further 3 years.

Essentially:

How can you govern business in relation to human rights issues given the global governance structures that we have?

April 08 3-part approach proposed

Primary responsibility for human rights lies with states

States need to encourage corporations, by

Encouraging positive corporate culture

Align and cohere policies

Seeking and receiving greater support from international agencies

The baseline responsibility of companies is to respect human rights.

Within its sphere of influence, a company should exercise leverage over other actors that are causing harm.

Suggests use of existing processes to exercise this duty to respect

Due diligence procedures

Strengthen existing frameworks

For example, NCPs of the OECD Guidelines

Companies should institute grievance mechanisms as part of their duty to respect

Use of non-judicial approaches to dispute resolution and access to remedy

Cf Gacaca process in Rwanda.

CSR Champions and champion networks (Doughty Center 2009)

Emerging, play a strategic role, causing change and sustaining it long term

One of a number of tactics to embed CR

Advantages: work directly with staff, connect division and regions, propagate CR practices

Allow a 'credible two-way interface between global and local (CR) in international companies

CSR Champions and champion networks (Doughty Center 2009)

Emerging, play a strategic role, causing change and sustaining it long term

One of a number of tactics to embed CR

Advantages: work directly with staff, connect division and regions, propagate CR practices

Allow a 'credible two-way interface between global and local (CR) in international companies

Key tips for success in CSR champions networks:

Must be business case

Medium term at least: 3-5 year plans

Must seek two way info flows

Look for innovative ideas

Must be adaptable

Key benefits:

Horizontal ownership of CR

Identify leaders and clarify roles

Localised / staff motivating

Builds CR profile / efficient channelling of resources

How big are champions networks?

80-500 depending on business, both full and part time

Use of ICT vital: intranets, email, but also in induction packs

Data gathering important, along with conference calls

Cases include: Reed, Alliance Boots, Accenture, PwC

An attempt by large companies to communicate about non-financial impacts on society

Began in printed form as self produced reports, continues to be more 'push' than 'pull. Now both print and online form

Companies seek to promote themselves to media, employees, stakeholders. All say shareholders not interested!

CSR reporting now including more hard data on performance (H&S and Climate Change) in biggest firms

Scepticism: NGOs and many others cynical. Honesty in reporting improving slowly

Tools growing in use:

Global ReportingInitiative (900 firms, 2006)

Global Compact(2000-3000, 2008)

Impact on quality debatable!Companies not innovating quickly. Communications a major issue!

How is reporting changing?

Adams and Frost(2006)

Lack of research focus in academia on link to strategy

Companies make general disclosures: 71% of Aus. reporters give no data on performance!

41 % of UK firms fail to offer targets in reporting

Case study approach shows lack of consistency in approaches: due to difference in firms , making comparison difficult

Morsing and Schultz(2006)

Discuss risks of raising head above public parapet

Stakeholder expectations a moving target: need for reporting to evolve

Increasingly sophisticated approaches needed

Suggest three models exist:

Information strategy / Response strategy / Involvement strategy

Companies aware of scepticism and concerned about who reads reports

Many moving towards stakeholder panels and statements

E.G (Shell, BP, Imperial Tobacco, Guardian)

Kolk (2006): Large variation in how it is done, many subjective statements

Concludes assurance/verification is not wholly convincing or reliable

Wal-Mart:committed to being supplied 100% by renewable energy, creating zero waste and selling environmentally-friendly products

BT :80% carbon emissions reduction target by 2020

ArcelorMittal , Corusand ThyssenKrupp :1 billion Euro research project on gas recycling and CCS in EU

Interface:Aiming to beenvironmentally neutralby 2020. 60% achieved

South Korea:South KoreaGreen Growth Plan : $84bn five-year programme to develop green industry as growth engine for entire Korean economy

Tesco : 100 million climate technologies fund, pledged to cut energy usage per square foot by50%by 2010, compared to 2000 levels

Iberdrola : Worlds largest provider of renewable energy: 44GW of renewable assets at different stages of development,95%of it wind power

Shell:Includes cost of carbon emissions when budgeting for all new projects

Unilever : Reduced CO2 emissions in manufacturing operations by more than30%in a decade

Lafarge : 20% cut in net emissions per tonne of cement worldwide and a10%cut in absolute emissions in industrialized countries by 2010, from 1990 levels

Plan Alaunched January 2007

Stores 10% more energy efficient. Logistics 20% more fuel efficient

Reduced food packaging by 16% and food carrier bag usage by 83%.Saved 50 million in 2009

2010:80 new commitments . Complement the existing 100 which will still be delivered by 2012 (45 already achieved).

Build Plan A into every one of the 2.7 billion individual M&S products sold each year by 2020 ( 50% of products by 2015 )

Help 1 million M&S customers develop their ownpersonal Plan Aby 2015 and 3 million by 2020.

100,000 prize (Your Green Idea) for thebest customer ideato help green M&S

Offering employeesfree loft insulation

Huge shifts in manufacturing to Asia in particular since the late 1980s

This includes environmental impacts: e.g. waste paper to china, 'recycling' of electronics to Africa

Also includes huge shift in carbon intensity to Asia. We have outsourced our emissions

New global risks have emerged for companies: Chevron in Ecuador, Trafigura in C'ote D'ivoire, emissions generated in low cost countries complete with political instability

Post Kyoto negotiations underway in 2009 mean greater pressure on smaller economies on carbon emissions, GHGs, forestry. More focus on EcoSystem Services

Anti-corruption enforcement will grow (DoJ / SEC / SFO stats for 2007/8)

Chinese and Asian labour laws may tighten up

Recession ethical supply chain investment cuts by companies

Human rights will grow in importance (Ruggie)

Role of business in development will grow (Bottom of Pyramid strategies, EU lobbying)

Consumer, NGO and political suspicions of big business increased by recent events in banking, financial and corporate scandals (Banks, Satyam, Madoff)

Which industry sectors are most active in global Corporate Social Responsibility (CSR) and why? One answer to this question would be as follows: The industries most active are those that are most vulnerable to public pressure and poor reputations.This is because companies seeking to maintain political favour, companies deeply concerned about their reputation with both consumers and employees, companies in high impact sectors such as natural resources (oil, gas and mining) spend most on CSR usually companies who are most vulnerable to upcoming changes in law, such as those emitting a lot of CO2.

Should UK law be changed to ensure that UK companies can be sued in UK courts for alleged malpractice or complicity in human rights abuses overseas?In your answer, provide examples to illustrate your response. One answer to this question would be as follows:No, because that would mean that anyone could sue a UK company in a UK court for alleged abuses or complicity. This would attract many spurious law suits designed to persuade UK firms to settle out of court, as with the Alien Tort Claims act in the UK. There is also a serious question of who would investigate these abuses and pay for the investigations.This would also mean the undermining of legal institutions in other, usually emerging economies.NGOs such as the CORE campaign argue that this is the best way to ensure corporate accountability for human rights.

Can voluntary approaches to cutting carbon emissions can be made to work effectively?Use examples to illustrate your answer. One answer to this question would be as follows:They can, but only to a certain degree. It can depend on what you mean by 'work'.Emissions trading can have an impact if the carbon price is high enough.Emissions trading currently only applies to very large polluters.There are plans to expand this in the UK in 2010 but it will likely only have a limited impact.Voluntary approaches to improving corporate environmental performance have been shown to have limited impact.Changes in the law have driven much more change (WEE directive, REACH etc).This is not to say voluntary efforts do not drive change (Responsible Care in chemicals).But voluntarism has definite limits for corporate environmentalism, not least the free rider problem in voluntary schemes.

Does using theGlobal Reporting Initiative (GRI) reporting guidelines mean that companies who do so are better at CSR? One answer to this question would be as follows:While the GRI is a comprehensive list of indicators that companies can report against, critics claim that it encourages box ticking.Some of the best companies at CSR do not use it, but report on indicators developed internally, rather than taking a cookie cutter approach.While GRI provides useful guidance, over-usage can lead to the guidelines driving the report, rather than the report being about the specific issues inherent in the business.However, many of the companies that use GRI to a good extent are among the best at CSR according to some commentators.But this does not mean companies that don't make much use, if any, of them must be bad at CSR reporting.

Do CSR rankings mean that the companies included in the ranking are more ethical than those that are not?Use examples to illustrate your answer. One answer to this question would be as follows: No. Rankings are a bit of a myth.It is true that companies who are included in the rankings tend to bethose that are active on CSR.However, trying to compare an oil firm with a consumer goods firm is pointless.This is because they are two very different industries.Indicators are not standardised.Social and environmental impacts are very different.How would one take what is essentially a subjective area (social performance) and credibly compare companies in different industries with differing operations?

Can CSR lead to real business innovation in large companies?Illustrate you answer using examples. One answer to this question would be as follows:Yes, it definitely can. Examples include bottom of the pyramid business strategies and employee, NGO and stakeholder engagement as early warning systems and places to spot innovation.Examples might be: British Gas seeking customer loyalty by encouraging energy efficiency, which saves customers money; Micro-finance: An industry based entirely on the day to day needs of poor people in emerging economies; Employee engagement: companies who engage employees in CSR have more satisfied and motivated workers

final revision lecture, birkbeck, may 13 2010

Documents

business strategy

csr innovation

business lobbying

s activism

business objectives

communication model

lack of csr strategy

stakeholder engagement