Responsible Management

Session 3:

The institutional environment of CSR

Nathalie CRUTZENncrutzen@ulg.ac.be

Assistant Professor (HEC-Ulg)Visiting Professor (ESC Rennes)

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The institutional environment of CSR is extremely broad. Two major characteristics:

PROLIFIC: A significant number of organizations/institutions are involved in recommending how firms should respond to social and environmental issues

DIVERSE: A variety of principles, guidelines, standards, schemes, supporting activities, etc. have been developed by several actors and are used by businesses all over the world

These organizations and related tools provide frameworks for responsible behaviors by

companies whatever their size, sector or nationality facilitate their implementation of CSR strategies help governments and civil society define their expectations

regarding business conduct

A selection of these institutions will be discussed today

Introduction

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Can you give some examples of institutions related to CSR ?

How can we classify them?

Introduction

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A. Institutions that set general CSR principles 1) International declarations of principles

2) (International and national) Laws and regulations

B. Institutions that provide CSR instruments3) Socially Responsible Management : CSR standards

4) Socially Responsible Consumption: Eco-labeling schemes

5) Socially Responsible Investments

Extra-financial rating agencies

Sustainability-oriented stock market indices

C. Other InstitutionsNGOs, specialized networks, consultancies… (the “CSR industry”)

The institutional environment of CSR - Agenda

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A. Institutions that set general CSR principles 1) International declarations of principles

2) (International and national) Laws and regulations

B. Institutions that provide CSR instruments3) Socially Responsible Management : CSR standards

4) Socially Responsible Consumption: Eco-labeling schemes

5) Socially Responsible Investments

Extra-financial rating agencies

Sustainability-oriented stock market indices

C. Other InstitutionsNGOs, specialized networks, consultancies… (the “CSR industry”)

The institutional environment of CSR - Agenda

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a. OECD Guidelines for Multi-National Companies (MNCs)

b. United Nations Global Compact

c. ILO Labor Standards (ILO Conventions)

d. Principles for Responsible Investment (UNPRI)

e. Caux Round Table Principles for Business

f. Global Sullivan Principles

g. Global Reporting Initiative

1) International declarations of principles

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a. OECD Guidelines for MNCs The Organization for Economic Cooperation and Development

A unique forum where 34 governments work together to address economic, social and environmental challenges of globalization (see comments page for member states)

What? Governmental guidelines - voluntary principles and standards

concerning responsible business conduct Areas: employment and industrial relations, human rights, environment,

information disclosure, combating bribery, consumer interests, science and technology, competition, and taxation.

For whom? multinationals operating in or from adhering countries

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The UNGC was launched in 2000 by Kofi Annan, the then Secretary-General of the United Nations.

http://www.youtube.com/watch?v=hBRLRehpVY0

It is a strategic policy initiative for businesses that are committed to aligning their operations and strategies with ten universally accepted principles in the areas of

Human rights Labour (workplace) Environment Anti-corruption

Once they adhere to the initiative, companies have to report annually on the progress they have made. Those which don’t are excluded.

However the UNGC is often criticized, especially by civil society, for its absence of legal constraints and control mechanisms on the engagements promised by companies

b. The UN Global Compact (1)

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Ten Principles (http://www.unglobalcompact.org/AboutTheGC/TheTenPrinciples/index.html)

Human rights

Principle 1: Businesses should support and respect the protection of internationally proclaimed human rights (

http://www.un.org/en/documents/udhr/index.shtml)

Principle 2: Make sure that they are not complicit in human rights abuses 

Labor

Principle 3: Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining

Principle 4: The elimination of all forms of forced and compulsory labor

Principle 5: The effective abolition of child labor

Principle 6: The elimination of discrimination in respect of employment and occupation

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b. The UN Global Compact (2)

Ten Principles

Environment

Principle 7: Businesses should support a precautionary approach to environmental challenges

Principle 8: Undertake initiatives to promote greater environmental responsibility

Principle 9: Encourage the development and diffusion of environmentally-friendly technologies

   

Anti-Corruption

Principle 10: Businesses should work against corruption in all its forms, including extortion and bribery

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b. The UN Global Compact (3)

A United Nations agency responsible for drawing up and overseeing international labor standards

ILO brings together representatives of governments, employers and workers to jointly shape policies and programs promoting decent work for all “real world” knowledge about employment and work.

183 member countries, over 180 conventions dealing with labor standards: labor, discrimination, working hours, compensation.

The conventions mainly concerns 8 key areas http://www.ilo.org/ilolex/english/convdisp1.htm

c. The ILO Conventions (1)

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Child Labor: workers under the age of 15; minimum lowered to 14 for countries operating under the ILO Convention 138 developing-country exception

Forced Labor: No forced labor, including prison or debt bondage labor; no lodging of deposits or identity papers by employers or outside recruiters

Health and Safety: Provide a safe and healthy work environment; take steps to prevent injuries; regular health and safety worker training; system to detect threats to health and safety; access to bathrooms and potable water

Freedom of Association and Right to Collective Bargaining: Respect the right to form and join trade unions and bargain collectively; where law prohibits these freedoms, facilitate parallel means of association and bargaining

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c. The ILO Conventions (2)

Discrimination: No discrimination based on race, caste, origin, religion, disability, gender, sexual orientation, union or political affiliation, or age; no sexual harassment

Discipline: No corporal punishment, mental or physical coercion or verbal abuse

Working hours: Comply with the applicable law but, in any event, no more than 48 hours per week with at least one day off for every seven day period; voluntary overtime paid at a premium rate and not to exceed 12 hours per week on a regular basis; overtime may be mandatory if part of a collective bargaining agreement

Compensation: Wages paid for a standard work week must meet the legal and industry standards and be sufficient to meet the basic need of workers and their families; no disciplinary deductions 13

c. The ILO Conventions (3)

d. The Principles for Responsible Investment (PRI)

UN-backed project made up of a network of investors which work together to implement the 6 PRI (Principles for Responsible Investment)

These were devised by the investment community

As environmental, social and corporate governance (ESG) issues can affect the performance of investment portfolios, they should be given appropriate consideration by investors

A voluntary framework by which all investors can incorporate ESG issues into their decision-making and ownership practices.

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e. The Caux Round Table Principles for Business (1)

An international network of business leaders founded in 1994 which works to promote a moral (principled) capitalism - sustainable and socially responsible prosperity - the foundation for a fair, free and transparent global society.

Provides a vision and recommendations to business leaders worldwide so they will make ethical decisions and act responsibly to the challenges of globalization (see “Action at the country level PPT”)

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g. The Global Reporting Initiative (GRI)

A multi-stakeholder network

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g. The Global Reporting Initiative (GRI)

The world’s most widely used sustainability reporting framework

Main goal: mainstream transparency on environmental, social and governance (ESG) performance

GRI's Reporting Framework was developed through a consensus-seeking, multi-stakeholder process (MNCs, civil society, labor organizations, academic and professional institutions)

Sustainability reports based on the GRI Framework can be used to: • demonstrate organizational commitment to sustainable

development, • compare organizational performance over time• benchmark performance against laws, standards and

voluntary initiatives

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1. Who is responsible for the formulation and implementation of CSR declarations of principles?

2. What is the role of governments with regards to such international declarations of principles?

3. Do you think that CSR principles should be mandatory? Why/ Why not?

4. Which stakeholders should take part in the formulation of international CSR principles?

Questions

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A. Institutions that set general CSR principles 1) International declarations of principles

2) (International and national) Laws and regulations

B. Institutions that provide CSR instruments3) Socially Responsible Management : CSR standards

4) Socially Responsible Consumption: Eco-labeling schemes

5) Socially Responsible Investments

Extra-financial rating agencies

Sustainability-oriented stock market indices

C. Other InstitutionsNGOs, specialized networks, consultancies… (the “CSR industry”)

The institutional environment of CSR - Agenda

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Do you have some examples in your

countries?

2) (International and national) laws and regulations

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Two examples:

European Commission’s recommandation (30 May 2001) on the recognition, measurement and disclosure of environmental issues in the annual accounts and annual reports of companies

“Loi NRE” in France about the social and environmental reporting by listed

firms

!! It is demonstrated that the European or the national institutional context may still have an impact on CSR practices and activities in the country/areas

Indeed, the economic structure, the role of the nation-state and the socio-cultural orientation of a country/area create fundamentally different contexts in which businesses interpret their responsibilities towards society

Ex. The Walloon Region – “Creative Wallonia”

http://www.wallonia-mipim.be/

2) Laws and regulations

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A. Institutions that set general CSR principles 1) International declarations of principles

2) (International and national) Laws and regulations

B. Institutions that provide CSR instruments3) Socially Responsible Management : CSR standards

4) Socially Responsible Consumption: Eco-labeling schemes

5) Socially Responsible Investments

Extra-financial rating agencies

Sustainability-oriented stock market indices

C. Other InstitutionsNGOs, specialized networks, consultancies… (the “CSR industry”)

The institutional environment of CSR - Agenda

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Some organizations propose standards including certification schemes to which firms may voluntarily adhere, such as:

a. ISO (Global norms)

b. EMAS (EU norm)

c. SA 8000

3) CSR standards

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a. ISO Standards

The world’s largest developer of voluntary, international standards

60 years old

Network of 163 countries

18,000 standards

Use in supply chain management

Three famous standards ISO 9001: quality standards ISO 26000: CSR standards ISO 14000: Environmental standards

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b. EMAS (Eco-Management and Audit Scheme)

A (European) management tool to evaluate, report, and improve environmental performance

Explicitly integrates all ISO 14001 principles

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A global social accountability standard for decent working conditions, developed and overseen by Social Accountability International (SAI).

SA 8000 is an auditable certification standard based on the UN Universal Declaration of Human Rights, Convention on the Rights of the Child and various International Labour Organization (ILO) conventions

SA 8000 covers numerous areas of accountability: Child Labour; Forced Labour; Health and Safety; Freedom of Association and Right to Collective Bargaining; Discrimination; Discipline; Working Hours; Compensation and Management Systems for Human Resources

The industrial sectors with the most certifications include apparel and textiles; building materials; agriculture, construction, chemicals, cosmetics, cleaning services and transportation

The countries with the most certification to SA 8000 include Brazil, India, China and Italy

c. SA 8000

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1. Do you think that international CSR standards and standards have a sustainable impact upon business? Why / why not?

2. Some skeptics say that these CSR standards and norms are just another business as many of the organizations involved make a lot of money of the business community. What is your opinion?

Questions

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A. Institutions that set general CSR principles 1) International declarations of principles

2) (International and national) Laws and regulations

B. Institutions that provide CSR instruments3) Socially Responsible Management : CSR standards

4) Socially Responsible Consumption: Eco-labeling schemes

5) Socially Responsible Investments

Extra-financial rating agencies

Sustainability-oriented stock market indices

C. Other InstitutionsNGOs, specialized networks, consultancies… (the “CSR industry”)

The institutional environment of CSR - Agenda

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Eco-Labeling

Market instruments designed to provide manufacturers with an incentive to produce environmentally-friendly products and services

A form of sustainability measurement aimed at environmentally-conscious consumers / shoppers.

The Eco-label index tracks 373 ecolabels in 214 countries and 25 industries

Usage:• Quantify pollution or energy consumption by way of

index scores others• Assert compliance with a set of practices or minimum

requirements for sustainability

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Eco-Labeling vs Standards

Eco-labels• market-based instruments aimed at consumers• certify that a product or trading practice respects a

given, recognized set of criteria.

Standards• aimed at companies to embed CSR practices into

their strategy and operations• drive social and environmental performance

improvements attested in sustainability reporting.

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a. EU Ecolabel

b. Max Havelaar

c. Forest Stewardship Council (FSC)

d. Marine Stewardship Council (MSC)

4) Eco-labeling schemes

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a. EU Ecolabel

http://www.youtube.com/watch?v=9KVzKZsXFsU

A voluntary scheme which starting in 1992 designed to encourage businesses to take environmental issues seriously

The label makes it easier for consumers to identify and choose products which are less harmful to the environment than equivalent brands For example, eco-labels are awarded to energy efficient or recyclable products or those that do not contain CFCs

Labels awarded on criteria set by the EU and cover the whole life cycle of a product: from the extraction of raw materials manufacturing distribution use disposal (cyclic capitalism: take – make – waste)

Examples of early products with this label: washing machines, paper towels, typewriter paper, light bulbs and hairsprays

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b. Max Havelaar

The Max Havelaar Foundation awards a quality label to fair trade products

Fair trade-certified farmers (Africa, Latin America, Asia)

are paid a guaranteed minimum price for their products that provides them with a stable income

FT contributes to improved living and working conditions of small farmers and agricultural workers in disadvantaged regions

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Organic foods (Food Standards Agency UK) and AB (France): two organic food labels.

Fair Trade Label: helps producers in less developed countries to make better trading conditions and to promote sustainability

Example: Food Labeling

Established in 1993 as a response to concerns over global deforestation, FSC fosters responsible forest exploitation

It is a multi-stakeholder organization, nationally represented in more than 50 countries worldwide

It applies the directive of its membership to develop forest management and a chain of custody standards, deliver trademark assurance and provide accreditation services to a global network of committed businesses, organizations and communities

FSC certification provides a link between responsible production and consumption of forest products, enabling consumers and businesses to make purchasing decisions that benefit people and the environment as well as providing business value

c. Forest Stewardship Council (FSC)

http://www.youtube.com/watch?v=8hnJAsDJ2bQ

http://www.fsc.org/107.html35

A fishery certification program and seafood eco-label which recognizes and rewards sustainable fishing

It is a global organization working with fisheries, seafood companies, scientists, conservation groups and the public to promote the best environmental choice in seafood

The mission of the MSC is to use their eco-label and fishery certification program to contribute to the health of the world’s oceans by recognizing and rewarding sustainable fishing practices, influencing the choices people make when buying seafood, and working with their partners to transform the seafood market to a sustainable basis

Standards include sustainable fishing and seafood traceability

d. Marine Stewardship Council (MSC)

http://www.youtube.com/watch?v=MCqBbG2deT0http://www.youtube.com/watch?v=fAEPcZKsd0M&feature=relatedhttp://www.msc.org/about-us

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A. Institutions that set general CSR principles 1) International declarations of principles

2) (International and national) Laws and regulations

B. Institutions that provide CSR instruments3) Socially Responsible Management : CSR standards

4) Socially Responsible Consumption: Eco-labeling schemes

5) Socially Responsible Investments

Extra-financial rating agencies

Sustainability-oriented stock market indices

C. Other InstitutionsNGOs, specialized networks, consultancies… (the “CSR industry”)

The institutional environment of CSR - Agenda

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6a) Extra-financial rating agencies

Vigeo (France – Belgium) Premier European rating agency Measures companies’ social and environmental performance

and sells information to asset managers Does social responsibility audits for companies and

organizations Manages the ASPI Sustainability Performance Index, “a triple

bottom line perspective”

SAM (Sustainable Asset Management) Zurich-based investment group focused exclusively on

sustainability investing Analyzes over 1,000 listed companies annually

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DJSI (Dow Jones Sustainability Index)

FTSE4GOOD (“Footsie for Good”)

ASPI Eurozone

To be developed in Session 6

6b) Sustainability stock market indices

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A. Institutions that set general CSR principles 1) International declarations of principles

2) (International and national) Laws and regulations

B. Institutions that provide CSR instruments3) Socially Responsible Management : CSR standards

4) Socially Responsible Consumption: Eco-labeling schemes

5) Socially Responsible Investments

Extra-financial rating agencies

Sustainability-oriented stock market indices

C. Other InstitutionsNGOs, specialized networks, consultancies… (the “CSR industry”)

The institutional environment of CSR - Agenda

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Which examples can you think of? (Discussion of pre-

module assignments + other ideas)

Is this industry really “ethical”?

6) NGOs, specialized networks, resource centers, newsletters, consulting firms…

(The “CSR industry”)

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6) The “CSR industry”

a. Business-led networks

World Council for Sustainable Development Provides a platform for companies to explore sustainable

development, share knowledge, experiences and best practices, and to advocate business positions on these issues in a variety of forums

Works with governments, non-governmental and intergovernmental organizations

CSR Europe: The leading European business network for corporate social

responsibility with around 75 multinational corporations and 27 national partner organizations as members.

Mission: support member companies in integrating CSR into the way they do business, every day.

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6) The “CSR industry”

b. “For-Profit” consulting firms engaged in the support of

CSR activities

http://www.sustainabilityconsulting.com/

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6) The “CSR industry”

c. Active NGOs fighting for a better world

World Wildlife Fund (WWF)

Mission: stop the degradation of our planet's natural environment, and build a future in which humans live in harmony with nature

Works with a number of partners, e.g., Lafarge for its quarries and Coca Cola on water conservation, to save biodiversity reduce humanity’s impact on natural habitats.

WWF focuses strategically on Conserving critical places and critical species that

are particularly important for their habitat or for people.

Reducing humanity's ecological footprint 44

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Rain Forest Alliance and video Biodiversity, resource conservation, responsible tourism Actively works against deforestation and climate change. Promotes innovative solutions for global conservation -

protected forests, productive farms, improved communities, clean water, and healthy habitats

Greenpeace Since 1971, this independent global campaigning

organisation that acts to change attitudes and behaviour, to protect and conserve the environment and to promote peace by addressing

Climate change Unsustainable fishing Forest destruction Hazardous chemicals in products and manufacturing Unsustainable agriculture

6) The “CSR industry”

http://www.goodnesstv.org/fr/videos/voir/35190http://www.goodnesstv.org/fr/videos/voir/45170/1/

Collaboration is essential…With NPOs and NGOs

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TNT – WFP (World Food Programme)http://www.youtube.com/watch?v=JLkZMa4kDTc

Unilever and Unicefhttp://www.dirtylaundry.com/aboutus/foundation/unicef/

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WaterThe next battle

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Water issues

Conservation

Accessibility

Pollution

Privatization of water utilities Argument for: efficiency, service, less corruption Argument against: full-cost recovery, the nature of water (a public

good – should be managed by the government)

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Coca Cola Bottling PlantKerala, India

$ 1 bn. invested in Indian business 1993-2004

Problems Used 510,000 liters of groundwater daily Water table levels fell ay 8 – 12 m

Kerala bottling plant 2001-03 Campaign to close plant 2004 court order closing plant

http://www.youtube.com/watch?v=mzc9iudD3fE&feature=related

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Coca Cola Bottling PlantReaction, stakeholder issues

Reaction Reduced water use by 24% in plants Installed rainwater collection systems in 26 of their plans

Stakeholder partnerships of Coca Cola with Water Stewardship Initiative* WWF (partnership policies) Attention paide to water footprint

See also Alliance for Water Stewardship

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Coca Cola Bottling PlantCommitments to:

Reduce

Recycle

Replenish

See WWF India's partnership policy

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NestléBottled water

Arguments against Wastefulness: 3 l. water 1 l. bottled water Transportation costs Plastic bottles, recycling Tap water is a free, healthy substitute

Arguments for: health Toronto's ban on bottled water

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NestléSH management

Ad campaign

Lobbyist to manipulate municipal bans

Nestlé was accused of hiring a security firm to spy on NGO ATTAC in Switzerland and Colombia.