Chapter 5Corporate Responsibility

5-1

Changing Values

Today’s MBA students more readily make the connection between good corporate citizenship and stronger public image/reputation

Source: Aspen Institute Center for Business Education, October 2007, www.aspencbe.org

How do companies

benefit from fulfilling their

social responsibilities

?

What Stakeholders Influence CSR Strategy?

Source: PriceWaterhouseCoopers 5th CEO Survey

5-3

Social Responsibility and the Public

A survey conducted by public relations firm Hill & Knowlton revealed that 75% of Americans considered social responsibility issues when making their investment decisions.

$1 dollar out of every $8 under management in the US is invested in companies considered “socially responsible.”

Source: Social Investment Forum, Washington D.C

Social Responsibility and CEOs

68% of CEOs say corporate social responsibility is “vital” to profitability.

19% of CEOs “didn’t know”

Source: PriceWaterhouseCoopers 5th CEO Survey

Social Responsibility and Financial Analysts

92% believe that a company with a clear corporate social responsibility policy is better at managing environmental and social risk.

74% agree that companies do not effectively communicate their corporate social responsibility efforts to financial markets. Accordingly, this slows down the development of socially responsible investment.

Source: Corporate Social Responsibility Europe and Euronext

Corporate social responsibility? Corporations have a responsibility to all of their

stakeholders in all aspects of their business operations.

Businesses account for and measure the actual or potential economic, social and environmental impacts of their decisions.

CSR goes beyond simple philanthropy and is more about corporate behavior than it is about a company's charitable donation budget.

CSR is linked with the principles of Sustainable Development which argue that enterprises should be obliged to make decisions based not only on financial/economic factors (e.g. profits, ROI, dividend payments etc.) but also on the social, environmental and other consequences of their activities.

Why consider CSR? 1) It's important to give back to the community,

people, and environment from which we greatly benefit and profit.

BECAUSE you, as a company can gain a competitive and reputational advantage by demonstrating that you have the best interests of society at large as an integral part of your policy making.

Orlizty, Schmidt, and Rynes found a correlation between social/environmental performance and financial performance. Example - Starbucks

Snapshot of Starbucks

BUSINESS ENVY - captures $4 to $5 for a cup of coffee. Growth projections exceed 40,000 stores globally?

Starbucks formed a partnership with Conservation International (CI) in 1998 to encourage environmentally sound coffee-growing practices and to improve farmer livelihoods. The success of their first joint project in Chiapas, Mexico is serving as a model for new and future projects.

Starbucks success and CSR Invest in people and partners, promote

diversity and empowerment (learning from each other)

Training, education and benefits = loyalty, commitment and dedication

Leadership program Integrate CSR – building brand loyalty

Community involvement Reward volunteers Invest in local schools, education programs,

etc. Environment – shrinking the environmental

footprint Recycling pays Conservation and Organic (branding)

CSR trends and the the impact on the 21st century business Consumers are more socially aware and vote with

their pocketbooks 44% of British public believe it's very important

that a co. shows a high degree of social responsibility when they buy the co's product.

86% of consumers have a more pos image of a co. that is seen to be doing something that makes the world a better place.

Responsibilities to society, and env and labour practices are seen by the public to be more important than a co's economic contribution.

Corporations face severe punishment (criminal and/or financial) for bad behaviour (Enron and Arthur Andersen, Worldcom, Nike, Union Carbide (Bhopal) 58% of general public across Europe feel that

industry and commerce do not pay enough attention to their social and environmental responsibilities.

CSR trends and the the impact on the 21st century business The best people are seeking out responsible

organizations. 81% of young people have a strong belief in the power of

responsible business practice to improve profitability over time.

Corp responsibility is increasingly the key factor in attracting and retaining a talented and diverse work force.

Employee volunteer and community involvement programs create differentiation and improves retention. Co's see an improvement in media coverage Large % of volunteers achieve promotions Absenteeism reduced Greatly improved customer satisfaction

Corporate responsibility is a key factor in helping companies access capital. 86% of institutional investors x-cross Eur believe that social

and env risk management will have a pos impact on a co's long term market value

CSR trends and the the impact on the 21st century business

Corporate Responsibility opens opportunities to reduce present and future costs to the business and improve competitiveness, market position, and profitability. Energy efficiency produces large paybacks Greening the supply chain Clean production (reduce emissions, recycle

and reuse affluents Carbon credits

CSR is not targeted for just the large companies Large corporations are requiring their

preferred suppliers to subscribe to CSR and best practices.

Finding balance

Spend some time learning more about CSR

Determine what works best for your organization and culture and initiate and integrate a CSR component into your organization.

Balance the desire for profits with the needs of the community and the environment.

Invest in people. Be a change agent. Lead by example and others will follow.

– We will be known forever by the tracks we leave.– (Dakota)

Consider your tracks wisely...

Choose to make a difference...