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AN INTRODUCTION TO
CORPORATE RESPONSIBILITY
AIESEC EuroXPro 2006
Prague
21 March 2006
George Starcher, President, European Baha’i Business Forum
•
AN INTRODUCTION TO
• CORPORATE RESPONSIBILITY
• Prepared for EuroXPro 2006
• 21 March 2006
• Prague
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PURPOSE of this session :
. . . to further your understanding of corporate responsibility (CR) and to apply some of the basic concepts
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STRUCTURE OF THIS PRESENTATION
• 1. What is Corporate Responsibility (CR)?
• 2. The “shareholder” vs “stakeholder” concepts
• 3. How do companies put this concept into practice?
• 4. What motivates companies to engage in CR?
• 5. The business case for CR.
• 6. SMEs are different.
• 7. Applying the concepts: What can I, We (NCs), They (AI)… do to deepen our understanding of CR?
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1. WHAT IS CORPORATE RESPONSIBILITY?
• Definition 1: European Commission
• “a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis”
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1. WHAT IS CORPORATE RESPONSIBILITY?
• Definition 1: European Commission
• “a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis”
• Definition 2: World Business Council for Sustainable Development
• “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.”
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Definition 3: AIESEC
Òbusiness taking an active role in addressing
economic, social, and environmental issues at both
global and local community levels.Ó
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CR is often used interchangeably:
Corporate Social Responsibility
Business Ethics
Sustainability
Sustainable Development
Triple Bottom Line
Business in Society
Stakeholder management
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2. STAKEHOLDER MANAGEMENT
• Stakeholders are those parties impacted by the corporation and upon whom its ultimate success depends.
• Who are the major stakeholders in addition to investors?
Employees (managers, employees, families, retirees) Customers (direct and indirect) Business partners (suppliers, joint ventures, alliances) Communities (regional, national, local) Environment
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Enterprise eco system: The stakeholder concept
EnterpriseEnterpriseEnterprise
Partners
Employ
eesCustomers
EnvironmentCommunitiesSup
pliers
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3. HOW DO COMPANIES PRACTICE CSR?
First, several generalizations:
1. CR is fundamentally a vision or philosophy about the purpose 2. and role of business in society.
3. Practices vary by company, CEO, culture, and tradition.
4. CR is a journey and a process of continuous improvement.
5. CR is an investment in building an image and reputation.
6. CR makes good business sense.
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CR is not:
Synonymous with Business Ethics
Limited to community involvement
Exclusive of environmental sustainability
Paternalism
Taking over the role of government
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Employees / Workplace
• Quality of Life
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Employees / Workplace
Quality of lifeHuman resource policiesResponsible restructuringHuman rightsDiversityJob creationTraining and educationHealth and wellnessHarassment
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Customers/consumers
Ethical marketing Products and Services Customer service Responsible procurement Audits Cause related marketing
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Suppliers
Codes of conductSupply chain management and monitoringHuman rightsLabour standards (ILO)Minority VendingFair Trade
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Community Involvement
Volunteerism Education Poverty alleviation Philanthropy
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Environment
Life-cycle management Greening the supply chain Pollution Public procurement Eco-Efficiency (recycling, consumption, ..)
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Business Ethics Codes of conductEthical audits and training
Governance Mission/vision/valuesCorporate cultureInternalizing costs
Regulation GovernmentCivil
Related issue areas
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REGULATION ETHICAL
ECONOMIC
WHAT DRIVES ETHICAL DECISIONS ?
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4. WHAT MOTIVATES COMPANIES TO BE RESPONSIBLE?
Business success and competitiveness
Competitive advantage (ex: Cooperative Bank UK)
Ethical reasons: doing the right thing
Fad, peer group pressure
License to operate
Social purpose/mission
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Examples:
Wal-Mart: increase fuel efficiency of trucks by 25% over 3 years (eco-efficiency)
Wal-Mart: audit supplier factories and reward them for environmental goals and cut emissions (responsible procurement)
Danone: closing factory in Mexico without layoffs or job loss (responsible restructuring)
Starbucks UK: employees volunteering on Christmas Day to support local homeless shelter; raising money for local causes (community involvement)
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5. THE BUSINESS CASE FOR CR
• Hundreds of studies and articles indicate a correlation between good social and environmental practices and financial results, e.g.:
• CR vs share price performance• Good HR practices vs ROI• Low pollution vs PE ratios• Quality vs market share• Community involvement vs employee
motivation
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5. THE BUSINESS CASE FOR CR
• Hundreds of studies and articles indicate a correlation between good social and environmental practices and financial results, e.g.:
• CR vs share price performance• Good HR practices vs ROI• Low pollution vs PE ratios• Quality vs market share• Community involvement vs employee
motivation
. . . but clear proof of cause and effect remains elusive.
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Nevertheless it is generally accepted that
responsible practices do impact competitiveness
in a number of convincing ways:
Enhancing the ability to attract, retain and
motivate employees
Reducing costs
Increasing revenues
Building external reputation and brand image
Protecting the companyÕs Ôlicense to operateÕ
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5. SMEs ARE DIFFERENT
• “CSR” is meaningless to SME owner/managers
The word “corporate” turns them off.
as does “social responsibility” to entrepreneurs preoccupied with their own survival and cash flow.
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•The values of the owner/manager
•Cost savings (ex eco-efficiency)
•Supply chain/customer requirements
•Potential to increase revenue
•Attraction, retention and motivation of employees
Yet five major drivers lead entrepreneurs to act responsibly:
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Certain types of SMEs are more
responsible
Enterprises with explicit social missions
Women owner/managers
Youth entrepreneurs
Family-owned businesses (legacy)
Cooperatives
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Women deal differently with
stakeholders
o With employees: more meaningful work
o With customers: greater loyalty and
satisfaction
o With suppliers: longer relationships
o With local communities: more volunteering
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6. LOOKING AHEAD
• CR will become more common practice.
• Public expectations of business will increase as the government role continues to diminish.
• There will be increasing demands for more transparency: “don’t tell me, show me”.
• Audits and annual social reports will become common, even mandatory in some countries
• CR will become a more strategic concern for management and be decentralized to business units
• New scandals involving business and government officials will focus increased attention on business ethics.
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• New models will emerge for allocation of costs and benefits among companies, customers, and society.
• Raw material shortages and environmental degradation will limit growth and job creation.
• Treatment of employees will become even more important to win the “war for talent.”
• Business will seek more partnerships with government and NGOs to address major issues.
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Sustainability
• 1987 Brundtland Commission: “the ability to meet today’s global economic, environmental and social needs without compromising the opportunity for future generations to meet theirs.”
• Dow Jones Sustainability Group Indes (DJSGI): “a business approach to creating long-term shareholder value by embracing opportunities and risks deriving from economic, environmental and social developments.””
• Michael Hopkins: Sustainable development means improving the quality of human life while living within the carrying capacity of supporting ecosystems.”