mba 292t.11 22 february 2009 professor kellie a. mcelhaney
TRANSCRIPT
MBA 292T.1122 February 2009
Professor Kellie A. McElhaney
Morning:◦ Welcome & intros◦ CSR in the News◦ Defining CSR◦ CSR Frameworks & Systems
Afternoon◦ CSR Reporting & Communications◦ CSR Cases◦ CSR Strategy Development Assignment◦ Personal SR Strategy Assignment
Surprising survivors: Corporate do-gooders◦ As companies cut costs, social responsibility may seem like an easy
target. But many big names are sticking with the program.
◦ Tough season for Intel. Its stock price slipped 42% in 2008 and its fourth-quarter numbers were poor, with net income off 90% from a year earlier. Days before releasing its fourth-quarter results, the company launched the Small Things Challenge, a commitment of up to $300,000 to education and development in countries like Afghanistan, Cambodia, Haiti and Uganda in partnership with non-profit groups Kiva.org and Save the Children.
◦ "You can't save your way out of recession - you have to invest your way out," Intel chairman Craig Barrett told Fortune. "We look at our CSR activities in pretty much the same way: you can't just do them in good times and then just forget about them in bad times and hope to get any results."
Surprising survivors: Corporate do-gooders
Starbucks' stock lost more than half its value in 2008. CEO Howard Schultz responded quickly, outlining more than $400 million in cost reductions for 2009.
There was one area that escaped relatively unscathed: corporate responsibility. While Starbucks will cut some undisclosed costs, it recently launched a (Product) RED card to benefit African HIV and AIDS programs and plans to become the world's largest purchaser of fair trade coffee this year, among other efforts.
◦ Short-term thinking in a recession can lead to the "false belief that investments in people and training can wait; that corporate social responsibility can be put on the back burner," Schultz wrote in a November essay in the Huffington Post. "Now is a time to invest, truly and authentically, in our people, in our corporate responsibility and in our communities. The argument - and opportunity - for companies to do this has never been more compelling."
Wal-Mart Mexico Inaugurates Largest Sun-Operated Photovoltaic Installation in Latin America
◦ Solar panels will generate 20% of the store's energy requirements for a full year
◦ 1,056 solar panels were installed on the roof of Bodega Aurrera Aguascalientes
◦ 140 tons of CO2 emissions will be eliminated
◦ In 2005, Wal-Mart Mexico committed to the following sustainability efforts: 100% renewable energy sources by 2025 Zero water discharges by 2025 25% increase in eco-friendly items by 2012 Zero waste by 2025
One Year On, Clorox's Green Works Dominates Market
◦ Clorox's green gamble appears to be paying off: A year after the company launched its Green Works line of natural cleaning products, the brand has established itself as a leader in the category, capturing 42% market share.
Times Square Advertisers Turn to Wind Power
◦ Thirty of the Times Square's iconic lighted billboards - including Coca-Cola's long-running red sign - have shifted to 100% wind power.
Coca-Cola Enterprises Boosts Commitment to Sustainability with Launch of Largest Hybrid Electric Delivery Trucks in North America
◦ Coca-Cola Enterprises (NYSE: CCE) Chairman and Chief Executive Officer John F. Brock announced the deployment of the largest hybrid electric delivery trucks in North America
◦ CCE plans to deploy 185 hybrid electric trucks across the United States and Canada in 2009, bringing their total number of hybrid electric delivery trucks to 327, the largest such fleet in North America
Starbucks and Service
In celebration of Martin Luther King Jr. Day and the Inauguration, Americans are being encouraged to volunteer. Inspired by this effort and as part of the Starbucks(tm) Shared Planet(tm) commitment to communities, beginning January 21, Starbucks is teaming up with HandsOn Network for the "I'm In!" campaign
http://pledge5.starbucks.com/
"I'm In" invites our customers to pledge five hours to volunteer and connects them with projects in their communities. Our goal is to have one million hours pledged by January 25.
Offering a free cup of tall brewed coffee to anyone who fills out a pledge card to celebrate this call for service
Has been on sabbatical for a year
Wrote a book (see required reading)
Consulted
Got told she looked like Sarah Palin
Got a tattoo
Worked in Haiti
And is excited to be back in the classroom!
Recovering banker since 1992
University of Michigan (Ross) 1993-2002
Professor at UC Berkeley since 2002
Founding Director, Center for Responsible Business
Ranked #1 in world by Financial Times in 2008; Ranked #2 in country by WSJ in 2006 & 2007
Extensive Corporate consulting: Gap, HP, Nokia, Erste Bank, eBay, Navigant, McDonalds, Blue Cross, Statoil, Nvidia, Kimberly Clark, Twitter
Research focus areas: Strategies of CSR; Branding & CSR; Diversity & CSR
Book called Just Good Business out in Fall 2008
Name?
Occupation?
Why did you take this course?
What’s your passion?
About business strategy
Real-world, current, emergent
Fast-paced, packed in, like drinking from a fire hose
Taught using multiple methods
A unique learning experience
Experiential, hands-on, active
Something that will stay with you
Typical b-school course with HBS cases
Traditional, straight-lecture, cut and dry, neatly packaged
For the close-minded or risk-averse
Good for passive non-participators in learning
For those who like to skip classes
For those attached to their lap tops, PDAs and cell phones
Philanthropy?
Employee volunteerism?
PR?
Transparent reporting?
Sponsorships?
Workplace diversity?
Human rights?
Risk management?
Sustainable development?
Corporate governance?
Business ethics?
Employee treatment?
Environmental impact?
Safe products? Solving socialproblems?
How would you define CSR?
The “C” is the most important aspect
CSR is about making money
You can do well from doing good
You must talk about it
You can’t lead (consumers) with it (yet)
No company is 100% good or 100% bad
A business strategy that:
◦ Creates wealth◦ Protects wealth
It is about using the power of business to improve the world.
$25M commitment in 1999
Given $34M, plus 73,000 appliances to 36,000 homes
Pledged to give through 2011
Launched Building Blocks initiative in 2006, sending over 1000 employees & more volunteers to build an entire block
Was philanthropy; became a brand message◦ “We make very large, very heavy metal machines, often with
big motors. This puts a human face on what could be a very cold metal category.”
Sponsored Reba McEntire Habitat for Humanity Tour
Another Company That Gets It
To be supplied 100% by renewable energy
To create zero waste
To sell products that sustain our resources and environment
Wal-Mart’s Sustainability Goals
Supply Chain of the Future
2008: “The Company of the Future”
The Role of the Private Sector
2007
Company/Country
Revenue (Fortune Magazine)GDP (World Bank)
[millions, USD]
1 United States 13,201,819
2 Japan 4,340,133
3 Germany 2,906,681
4 China 2,668,071
5 United Kingdom… 2,345,015
22 Exxon Mobil 339,938
23 Poland 338,733
24 Austria 322,444
25 Wal-Mart Stores 315,654
26 Norway 310,960
27 Saudi Arabia 309,778
28 Royal Dutch Shell 306,731
29 Denmark 275,237
30 BP 267,600
Trust in business at all-time low (lower than post-Enron)
Edelman Trust Barometer, 2009
The Challenges of our World
Net Impact:◦ Using the power of business to improve the world.
Business for Social Responsibility (BSR): ◦ Companies being able to be commercially successful
in ways that demonstrate respect for ethical values, people, community, and the environment.
A Corporate Strategy Definition (McElhaney, 1998):◦ A corporate strategy that is integrated with (1) core
business objectives & (2) core competencies to create financial and social/environmental returns, and is embedded in corporate culture and day-to-day business operations.
CSR Strategy must fit two things:
◦Core business objectives: Increase sales, penetrate new markets, engage
employees, reduce operating expenses, improve reputation, protect brand, beat competitors
◦Core competencies: Technology, financial products &services, making
markets, natural food, automobiles and transportation systems, travel & tourism.
• Employee Engagement
• Community Investment
• Philanthropy
• Government & Public Relations
• Governance & Ethics
• Environmental Footprint
• Supply Chain/ Sourcing
• Social/ Environmental Impact of Products & Services
Hewlett Packard, 2006
Philanthropy
NGO p’nerships
Social/ environmental reporting
Product give-aways
Sponsorships
Workplace diversity
Human rightsEmployee volunteerism
Cause marketing
Corporate governance
Business ethics
Fair employee treatment
Enviro managementSafe products Community
investment
Supply Chain
…to utilize CSR as a powerful integrated business strategy, not an add on.
Spending (a little bit of) the (whole lot of) money that you make.
How you make (the whole lot of) money that you spend.
CSR is not about how you spend the money you make.
It’s about how you makethe money you spend.
Soci
al
Env
iron
men
tal
Eco
nom
ic
Triple Bottom Line
Economic
Triple
Bottom LineJ. Elkington, SustainAbility
Supply Chain
Environment
Transparency
Human Rights
Stakeholder Engagement
Privacy
Marketplace
Community Engagement & Investment
Governance
Mission, Vision, Values
Ethics
Diversity
Health & Wellness
Downsizing & Layoffs
Work Life Balance
Job Satisfaction
Compensation/ Benefits
Philanthropy
Socio-political Issues
Reporting
Accountability
Source: Globescan 2005
Source: 2006 Fleishman Hillard/National Consumers League study,
“Rethinking Corporate Social Responsibility”
Civil
Strategic
Managerial
Compliance
Defensive
Current Trend
Historical FocusRisk Mitigation
Value Creation
SweetSpot
Framework #1: The Changing Social Contract
Source: The McKinsey Quarterly , 2006
ECONOMICECONOMICSOCIALSOCIAL
“PEOPLE, PLANET, PROFIT”
Framework #2: Triple Bottom Line
ENVIRONMENTALENVIRONMENTAL
Workplace
Marketplace
Environment
Community
Employees Retirees/alumni Recruits
• Clients/customers• Regulators/
legislators• Investors• Academics• Suppliers
• Communities in which we live and work
• Not-for-profit and non-governmental organizations that support communities• Physical environment
• Not-for-profit and non-governmental organizations that support the environment
SustainAbility, Executive Summary: The Changing Landscape of Liability, January 21, 2005
• Use core assets in a positive way, to improve underlying business context
• Take a big-picture view• Go beyond compliance• Lift or stabilize
reputation
• Prevent damage to reputation
• Forestall the negative use of core assets
• Focus on compliance and managing legal liability
MINIMIZE RISK
MAXIMIZEOPPORTUNITY
“The essential test that should guide CSR is not whether a cause is worthy but whether it presents an opportunity to create shared value – that is, a meaningful benefit for society that is also valuable to the business.”
Source: Porter, Michael E. and Mark R. Kramer, “Strategy & Society: The Link Between Competitive Advantage and Corporate Social Responsibility,” Harvard Business Review, 2006
Generic SocialIssues
Social issues that are not significantly affected by a company’s operationsnor materially affect its long-term competitiveness.
Value Chain SocialImpacts
Social issues that are significantly affected by a company’s activities in the ordinary course of business.
Social Dimensions of Competitive Context
Social issues in the external environment that significantly affect the underlying drivers of a company’s competitiveness in the locations where it operates
Generic SocialIssues
Value Chain SocialImpacts
Social Dimensions of Competitive Context
Good citizenship
Responsive CSR
Mitigating harm fromvalue chain activities
Strategic philanthropy that leverages capabilities to improve salient areas of competitive context
Strategic CSR
College Bound
Transform value chain activities to benefit society while reinforcing strategy
From Porter, Michael E. and Mark R. Kramer, “Strategy & Society: The Link Between Competitive Advantage and Corporate Social Responsibility,” Harvard Business Review, December 2006
“Offensive CSR can distinguish a company’s reputation but cannot protect it; defensive CSR can protect a reputation but cannot distinguish it. Both are necessary to succeed in today’s business climate.”
- Kramer & Kania, Changing the Game
1. Understand drivers (internal & external)2. Identify key CSR issues3. Identify & evaluate stakeholders4. Identify current functions supporting CSR5. Analyze current CSR systems, culture6. Design CSR structure7. Develop effective staffing plan8. Create cross-functional system9. Match budget to best framework
• Defensive▫ “It’s not our job to fix that”▫ Company faced with pain, criticism, reacts defensively
• Compliance▫ “We’ll do just as much as we have to”▫ Cost of doing business, do just as much as need to
• Managerial▫ “It is the business”▫ Moves CSR to core business managers & functions
• Strategic▫ “It gives us a competitive edge” ▫ Realigns strategy to use CSR as competitive advantage
• Civil ▫ “We need to make sure everyone does it”▫ Need to involve all in sector, collective action
Level of engagement Low High
Importance to mission Peripheral Strategic
Magnitude of resources Small Big
Scope of activities Narrow Broad
Interaction level Simple Intensive
Managerial complexity Infrequent Complex
Strategic value Modest Major
EXAMPLES ACTIONS: • Donation• Grants
• Event sponsorship• Cause-related marketing• Employee volunteerism
• Joint-advocacy• Joint-action• Deep partnerships• Financing principles
Philanthropic Transactional IntegrativeGrowth stage:
Adapted from The Collaboration Challenge, James E. Austin
What are the report's strengths & weaknesses? What are your specific recommendations for improvement?
Did the report change your opinion of this company? Would the report change your likeliness to work for this company, or
purchase their goods/ services as a consumer? Based on the report, what do you think are the key issues for this industry
and how well is this company addressing these issues?
Also consider the following issues:
◦ Does/ how does the company define CSR? How evolved is the company’s view of CSR? ◦ How integrated is their CSR strategy? Is it aligned with core business objectives, core
competencies?◦ How sustainable is their CSR strategy?◦ What are the metrics for success? How do they measure their CSR impact?◦ Who seems to be the targeted audience(s)? Is this clear from the report?◦ What are the opportunities associated with their CSR strategy? Risks? Strengths?
Weaknesses??◦ From a pure document aspect, assess the strengths and weaknesses of the report?