Corporate Responsibility

Dr Lance Moir
June 2006
Structure

• What is Corporate Responsibility?

• Current Pressures

• Value and Corporate Responsibility

• The approach at Leading Companies

Page 2
What is corporate responsibility?

The triple bottom line

Environment

Economic

Social

Page 3
What is Corporate Responsibility?

• Behaviour & conduct/good governance

• Responsible impact on society

• Accountability & transparency

• Stakeholder engagement

• Reputation & risk management

• Socially responsible investment

Page 4
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
Page 5
World-wide critical events and issues

• 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

Page 6
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)
Page 7
CR-related standards, guidelines and codes of
conduct
Now over 300 external CR tools, guidelines and codes of practice

hip Human EM
t ew ards Ethica e Cosm AS
st S l Trad Standa etics
Fore Council t
in g I ni
tiative rd
e Ac
Cod
l
m ina S OHS
g
Cri Acc ocial PERI Reportin AS1
lia n o
800 untabil Guidelines
8 001
s t ra 0 (S i
Au A8 0 ty
00)

an
South Afric ent
US Gove
rnment ICC B
usin
ov e rn me nt Employm Federal
Senten Charte ess
G Glob
Equity Act al Re Guidelin cing r
Sustain for
porti es
ng In
it iative Develo able
pment
in e Co rporate
Sunsh orting Global Sullivan
Rep
ur Practice Principles
od e of Labo 1
Basic C
1400
ICFTU Ca ISO
Prin ux Roun
ciple d
CERES s for Table
Investors in Principle Bus
People s ines
s

Page 8
The Global Compact

• 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

Page 9
What is corporate social responsibility?

The traditional model

Philanthropy in response to appeals

Social for help from society and social
responsibility investment in projects of long-term
importance to the company

The benefits of business

This is the core activity of the
•Investment
company providing the goods
•Jobs created
Business •Taxes paid
and services society wants

•Goods & Services

•Technology transfer
•Import substitution
•Export earnings
•Development of suppliers
•Human Resources Development

Page 10
 Four-Part model of Corporate Social Responsibility

Type of Responsibility Societal

Expectation Examples

Corporate contributions.
DESIRED of
Philanthropic Programs supporting community/education.
business by Community involvement/improvement; volunteerism
society
Avoid questionable practices.
EXPECTED of Respond to “spirit” of laws.
Ethical business by society Assume law is a floor behavior; operate above minimum required
by law.
Assert ethical leadership.

Obey all laws; adhere to regulations.

Environmental laws.
REQUIRED of
Legal Consumer laws.
business by society Laws affecting all employees.
Obey Foreign Corrupt Practices Act.
Fulfil all contractual obligations.

Be profitable.
REQUIRED of Maximise sales revenue.
Economic business by society Minimize costs (administrative, production, marketing, distribution).
Make wise strategic decisions.
Source: Carroll (1979)) Be attentive to dividend policy

Page 11
 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

Economic Product Safety

Responsibilities
Discrimination

Environment
Social Issues Involved
Consumerism

Page 12
The Three-Domain Model of Corporate Social Responsibility

(iii) Purely Ethical

(iv) Economic / (vi)

Ethical Legal /
Ethical

(vii) Economic /
Legal / Ethical

(v)
(i) Purely Economic Economic / (ii) Purely Legal
Legal

Source: Schwartz & Carroll, Business Ethics Quarterly, 2003

Page 13
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

Page 14
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
Econ Legal

Ethical Orientation (e.g., Consumers’ “Desired” Toy Co.) Balanced Orientation (e.g., Toy Industry)
Source: Schwartz & Carroll, Business Ethics Quarterly, 2003

Page 15
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.’

Page 16
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)

Page 17
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

Page 18
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

Page 19
Stakeholder Typology: One, Two, or Three
Attributes Present (Mitchell, Agle & Wood)

POWER
1
Dormant
Stakeholder LEGITIMACY
4
Dominant
Stakeholder

5 7 2
Dangerous Definitive Discretionary
Stakeholder Stakeholder Stakeholder

6
Dependent
Stakeholder
3
Demanding
Stakeholder

URGENCY 8
Nonstakeholder

Page 20
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)

Page 21
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

Page 22
Customers

Q Could you tell me, in your own words, what you think is
meant by the term corporate social responsibility?

Responsibility towards customers 20%

Responsibility towards local 17%

community
Responsibility towards employees 11%

Responsibility towards the 7%

environment
Acting responsibility/ethically 5%

Being profitable/successful 4%

Responsibility towards their 4%

shareholders

Base: 2,099 GB adults, October 2000 Source: MORI

Page 23
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 No opinion 1%

important
Not very
2%
important Very important
16%
33%

2003
%
Important 82
Not important 18
49% Net +64

Fairly important
Base: 1,044 GB adults 16+ July - August 2003 Source: MORI
Page 24
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 64% -2

Protecting the environment 60% -5

Recycling 60% -1
Unemployment/re-training
schemes 58% -2

Help for people with disabilities 56% +4

Job creation 51% -1

Protection of the countryside 50% 0

Base: 2,026 GB adults 16+ (350 customers) Source: MORI
Page 25
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
Fairly important
important 33%
59%

Base: 890 working GB adults 16+. Source: MORI

Page 26