Corporate Responsibility

1. Corporate Responsibility Dr Lance Moir June 2006

2. Structure • What is Corporate Responsibility? • Current Pressures • Value and Corporate Responsibility • The approach at Leading Companies

3. What is corporate responsibility? The triple bottom line Environment Economic Social

4. What is Corporate Responsibility? • Behaviour & conduct/good governance • Responsible impact on society • Accountability & transparency • Stakeholder engagement • Reputation & risk management • Socially responsible investment

5. The issues being addressed by CR • Supply chain • Human rights • Plant closures • Charitable giving • Work life balance • Cause related marketing • Environmental pollution • Sustainability…… These mean different things to different firms

6. 1970s Apartheid era South Africa - racial discrimination 1970s Nestle - marketing of breast milk substitute 1984 Union Carbide in Bhopal, India - environment 1995 Shell in North Sea (Brent Spar) - environment 1995 Shell in Nigeria (Ogoni) - distribution of resources 1996 BP in Colombia - security forces & complicity 2000 Mars, Cadbury, Hershey, Ivory Coast - child labour 2000 Chiquita, Del Monte etc., C. America - association 2000 Adidas in Pakistan - child labour 2002 Talisman in Sudan - complicity in repression 2000s Nokia, Motorola, Congolese Coltan - forced labour World-wide critical events and issues

7. Reasons for the focus on Business & Society • Globalisation - increasing trade • Markets growing faster than social and political structures • Sheer scale of business (51 of the top largest economic entities are corporations) • Technology • Growth of the internet and available data • Increase of NGOs (non-governmental organisations) • Increase in democracy • Growth of SRI (socially responsible investing)

8. CR-related standards, guidelines and codes of conduct Now over 300 external CR tools, guidelines and codes of practice EMAS Forest Stewardship Council Humane Cosmetics Standard Ethical Trading Initiative Australian Criminal Code Act Social Accountability 8000 (SA8000) PERI Reporting Guidelines OHSAS18001 South African Government Employment Equity Act US Government Federal Sentencing Guidelines ICC Business Charter for Sustainable Development Global Reporting Initiative Sunshine Corporate Reporting Global Sullivan Principles ICFTU Basic Code of Labour Practice ISO 14001 Caux Round Table Principles for Business CERES Principles Investors in People

9. Human Rights Human Rights within sphere of influence Complicity with rights violations - repression & conflict Labour The right to collective bargaining & freedom of association Eliminate forced and compulsory labour To effectively abolish child labour To end discrimination in the workplace Environment To support a precautionary approach to the environment Promote greater environmental responsibility Encourage the diffusion of environmentally friendly technology Anti- Corruption Work against all forms of corruption, including extortion and bribery The Global Compact

10. What is corporate social responsibility? The traditional model Philanthropy in response to appeals for help from society and social investment in projects of long-term importance to the company Social responsibility • The benefits of business • Investment • Jobs created • Taxes paid • Goods & Services • Technology transfer • Import substitution • Export earnings • Development of suppliers • Human Resources Development This is the core activity of the company providing the goods and services society wants Business

11. Four-Part model of Corporate Social Responsibility Societal Expectation Type of Responsibility Examples DESIRED of business by society Corporate contributions. Programs supporting community/education. Community involvement/improvement; volunteerism Philanthropic Avoid questionable practices. Respond to “spirit” of laws. Assume law is a floor behavior; operate above minimum required by law. Assert ethical leadership. EXPECTED of business by society Ethical Obey all laws; adhere to regulations. Environmental laws. Consumer laws. Laws affecting all employees. Obey Foreign Corrupt Practices Act. Fulfil all contractual obligations. REQUIRED of business by society Legal Be profitable. Maximise sales revenue. Minimize costs (administrative, production, marketing, distribution). Make wise strategic decisions. Be attentive to dividend policy REQUIRED of business by society Economic Source: Carroll (1979))

12. Carroll’s Corporate Social Performance Model Philosophy of Social Responsiveness Proaction Accommodation Defense Reaction Social Responsibility Categories Discretionary Responsibilities Ethical Responsibilities Shareholders Legal Responsibilities Occupational Safety Product Safety Economic Responsibilities Discrimination Environment Social Issues Involved Consumerism

13. The Three-Domain Model of Corporate Social Responsibility (iii) Purely Ethical (vi) Legal / Ethical (iv) Economic / Ethical (vii) Economic / Legal / Ethical (v) Economic / Legal (i) Purely Economic (ii) Purely Legal Source: Schwartz & Carroll, Business Ethics Quarterly, 2003

14. Categories in the Three Domain Approach • Purely economic – Lockheed bribes / Andersen shredding • Purely legal – tobacco health warnings • Purely ethical – Merck donation of drugs • Economic/ethical – sponsorship of arts • Economic/legal – Chapter 11 of Dow Corning? • Legal/ethical – Giving drugs at below cost to Africa? • Economic/legal/ethical – WalMart stops selling cigarettes in Canada

15. Corporate Social Responsibility “Portraits” Ethical Ethical Economic Legal Legal Econ Economic Orientation (e.g., CEO of Acme of Co.) Legal Orientation (e.g, Legal Dept) Ethical Ethical Econ Legal Legal Econ Ethical Orientation (e.g., Consumers’ “Desired” Toy Co.) Balanced Orientation (e.g., Toy Industry) Source: Schwartz & Carroll, Business Ethics Quarterly, 2003

16. How do firms look at CSR? The World Business Council for Sustainable Development proposes a definition for CSR as: ‘the ethical behavior of a company towards society. ….management acting responsibly in its relationships with other stakeholders who have a legitimate interest in the business.’ and ‘CSR is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large.’

17. The Management of Corporate Responsibility • Defensive (pain alleviation) • Traditional (cost-benefit) • Strategic - shifts business into a new direction. Thus part of corporate strategic intent • Learning, innovation and risk management Zadek (2001)

18. Stakeholders • Anyone who affects or is affected by an organisation Freeman • Primary stakeholders - those without whom org cannot survive • shareholders, customers, employees • Secondary • community, environment, opinion formers Clarkson

19. Issues with stakeholders • Stakeholder scanning and identification • Stakeholder consultation • Stakeholder engagement • Approach depends on view of the organisation and the need for a relationship with stakeholders

20. Stakeholder Typology: One, Two, or Three Attributes Present (Mitchell, Agle & Wood) POWER 1 Dormant Stakeholder LEGITIMACY 4 Dominant Stakeholder 7 Definitive Stakeholder 5 Dangerous Stakeholder 2 Discretionary Stakeholder 6 Dependent Stakeholder 3 Demanding Stakeholder URGENCY 8 Nonstakeholder

21. The Management of Stakeholders • Four strategies • Reactive • Defensive • Accommodative • Proactive Wartick and Cochran (1985) • Depends on stage in life cycle • Fits idea of resource dependency Jawahar and McLaughlin (2001)

22. The Management of CSR • Medium term cost/ benefit • incremental social policies • operational issues • Recent substantial change • reactive • ethical/ environmental issues • protective - risk and reputation key • Strategic - long term viability and competitive advantage -two forms • scenario mapping and strategic planning (top-down) • learning and innovation (bottom-up ) Lenssen 2001

23. Customers Q Could you tell me, in your own words, what you think is meant by the term corporate social responsibility? Responsibility towards customers Responsibility towards local community Responsibility towards employees Responsibility towards the environment Acting responsibility/ethically Being profitable/successful Responsibility towards their shareholders Source: MORI Base: 2,099 GB adults, October 2000

24. Most say it is important to reputation Q When forming an opinion about a particular company or organisation, how important is it to you to know about their activities in society and the community? Not at all important No opinion 1% Not very important Very important 2003 % Important 82 Not important 18 Net +64 Fairly important Source: MORI Base: 1,044 GB adults 16+ July - August 2003

25. Priority Activities Q Which areas do you feel it is extremely or very important that large companies contribute to or support? Change ‘02-‘03 + Top mentions Education -2 Protecting the environment -5 Recycling -1 Unemployment/re-training schemes -2 Help for people with disabilities +4 Job creation -1 Protection of the countryside 0 Base: 2,026 GB adults 16+ (350 customers) Source: MORI

26. Employees Q Thinking now about the organisation that you work for, how important is it to you that your own employer is responsible to society and the environment? Not all important 1% No opinion 1% Not very important 6% Very important Fairly important 33% 59% Source: MORI Base: 890 working GB adults 16+.