part 1 introduction to csr

CSR- INTERNATIONAL PERSPECTIVES

Patrick GILORMINI

Course objectives

• What is corporate social responsibility ?

• How corporate social strategy leads to competitive advantage?

• How corporate social responsibility is implemented and managed ?

• What is corporate social entrepreneurship?

Course overview

• Part 1: Introduction to CSR

1. Corporate social responsibility linked to sustainable development, corporate governance and ethics

2. Stakeholders approach to business and society relationship

3. Hard law and soft law in E.U. and France

• Part 2 : The business case for CSR

• Part 3 : CSR Implementation

• Part 4: Social Entrepreneurship

INTRODUCTION TO CSRPart 1.1

What defines a corporation ?

• Corporations regarded as ‘moral persons’ in the eyes of the law : rights and responsibilities in society

• Corporations regarded as notionally ‘owned’ by shareholders , but exist independently of them : limited liability

• Managers and directors have a ‘fiduciary’ responsibility to protect the investment of shareholders.

Origin of CSR

• Howard Bowen :American economist and president of the University of Iowa. He coined the concept of Corporate Social Responsibility.

• He defined Corporate social responsibilities as "the obligations of businessmen to pursue those policies, to make those decisions, or to follow those lines of action which are desirable in terms of the objectives and values of our society.“

[Social Responsibilities of the Businessman, 1953]

Can a corporation have social responsibility ?

Milton Friedman [1970] : “the social responsibility of business is to increase its profits”

�Corporate executives have responsibilities to their employees, stockholders, and principals to maintain the highest financial intake possible while acting within the bounds of the law of social mores, but these executives should not perpetuate their own social agendas (or the popular social agenda of the day) with the corporations’ finances.

Can a corporation have social responsibility ?

Milton Friedman premises :

• Only human beings have a moral responsibility for their actions

• Its managers' responsibility to act solely in the interests of shareholders

• Social issues and problems are the proper province of the state rather than corporate managers

� If corporate executives start pandering to the desires and whims of society then they will be elevating socialist doctrines and corrupting the free market economy.

1972 United Nation conference on environment,

Stockholm

Scientifics et NGO

Stop growth and protectenvironment

ecodevelopmentChangingconcepts

1970 1980 1990 2000

Changingactors

Triple Bottom Line

Corporations

Corporate social responsibility

1992, Rio Earth Summit

Sustainable development

Governments, Nations

1987 Brundtland

Commission

Consumers

2002, Johannesburg World Summit on SD

2007

Grenelle

de l’envir.

1999 ONU Global

compact

Kyoto

Protocol

2012

Horizon Grenelle

Momentum gained in 20 ans

SD gaining momentum

July 2012 9ESDES Université Catholique de Lyon

CSR LINKED TO SUSTAINABLE DEVELOMENT,CORPORATE GOVERNANCE AND BUSINESS ETHICS

Part 1.1

ESDES Université Catholique de LyonJuly 2012 10

septembre [email protected] 11

Ethics , governance, CSR and SD linked in a continuum



CorporateGovernance

Business ethics

Macro-économic and world wide social issues

Micro-economic et regional issues

Corporate structures and processes

Corporate management and control issues

Moral issues and Personal dilemnas

Corporate strategy Decision making



The Declaration of Rio on Environment and Development , 1992, recognized that sustainable development was a balance of three interconnected dimensions:

Territorial and global framework


What are the responsibilities of business in the context of a wider society ?• How they are defined and negotiated ? • How they are managed and organized ?


Archie B. Carroll (1983:608), “corporate social responsibility involves the conduct of a business so that it is economically profitable, law abiding, ethical and socially supportive. To be socially responsible then means that profitability and obedience to the law are foremost conditions when discussing the firm’s ethics and the extent to which it supports the society in which it exists with contributions of money, time and talent”


What does CSR involve ?

• Business has social obligation above and beyond making a profit

• Corporations have an obligation to constituent groups in society other than stockholders and beyond that prescribed by law or union contract

• CSR requires voluntary action

Six characterizations of CSR

Characterization Description

License to operate CSR is a condition for doing business. Find the most effective way to meet stakeholders’ requirements

Long-term business investment Like R&D , CSR improve the business environment for future progress

Vehicle for achieving goals and reputation

Stronger customer loyalty, more committed employees,…

Activity to avoid exposure to risk Avoid being singles out or exposed to unnecessary outsider intrusion

Economic and constructive Companies reinforce the economic foundation and viability of the communities in which it operates

Oxymoron ! Companies are designed to increase shareholder wealth !

Corporate governance

18July 2012 ESDES Université Catholique de Lyon

• The formal system of oversight, accountability, and control for organizational decisions and resources

• Governance issues:

– Board of directors independance, quality, and performance

– Shareholders activism and investors confidence

– Internal control and risk management

– Executive compensation

Views of Corporate Governance


• Shareholder model (stock companies) :

– Grounded on classic economic precepts

– Goal of maximizing wealth for investors and owners

– Managers act as agents of investors whose primary goal is increasing the value of the stock they own

• Democratic model ( cooperative companies ):

– One person , one vote right

– Elective process for nomination

Views of Corporate Governance


• Stakeholder model of corporate governance :

– Company has also a responsibility to answer to other stakeholders including employees, suppliers, government regulators, communities and special interest groups with which it interacts

– Due to limited resources companies must determine which of their stakeholders are primary

– Once primary groups have been identified managers must implement appropriate governance mechanisms to promote development of long term relationships

Business Ethics


• Moral obligations involving the distinction between what is good and what is bad

• Ethical issues :Honesty , Fairness, Integrity

– Abusive or intimidating behavior

– Conflicts of interests

– Bribery

– Lying…

Paul Ricœur (1913 -2005)

• Aristotelian view that action always aims at some good.

• Its ultimate aim is to be a constituent in a “‘good life’ with and for others in just institutions” (Oneself as Another, 262).

– For a good life, one must have associates with and for whom one acts.

– Furthermore, societal institutions, particularly political institutions, set the context for action and significantly affect its efficacy.

– For a good life, we aim to have institutions that meet our sense of justice in the obligations they impose and the privileges and opportunities they grant (Oneself as Another, 180).





CorporateGovernance

Business ethics








World Commission on Environment and Development ( Brundtland), 1987 :

”Sustainable Development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs".

24septembre 2009 [email protected]


Agenda 21 : a blueprint for sustainability in the 21st century.

• Provides options for combating the deterioration of land, air and water, whilst conserving habitats and their diversity.

• Deals with poverty, over consumption, health and education.

• Promotes roles for all. Everyone – governments, business, trade unions, scientists, teachers, indigenous people and youth – have roles to play in achieving sustainable development and should be involved in the decision making processes.

• Encourages the reduction of environmentally and socially detrimental processes, but within a framework which allows economic success


France move towards a green and equitable economy:

• Sustainable consumption and production,

• The knowledge society

• Governance

• Climate change and energy

• Sustainable transport and mobility

• Conservation and sustainable management of biodiversity and natural resources

• Public health, risk prevention and management

• Demography, immigration and social inclusion

• International challenges of sustainable development and the fight against global poverty

http://www.developpement-durable.gouv.fr/IMG/pdf/NSDSp60.pdf


• Sustainable development calls for improving the quality of life for all of the world’s people without increasing the use of our natural resources beyond the earth’s carrying capacity.

• The long-term success of sustainable development will depend on new approaches to transform business-as-usual at every level of society, both public and private.

• In addition to the important role played by governments, the active leadership of NGOs, businesses and other Major Groups is key to transforming sustainable development from vision to reality.


• Major Groups identified in Agenda 21:

– Business and industry

– Children and youth

– Farmers

– Indigenous people

– Local authorities

– Non-governmental organizations

– Scientific and technological communities

– Women

– Workers and trade unions


U.N. Open Working Group proposal for Sustainable Development Goals


U.N. Knowledge platform : http://sustainabledevelopment.un.org/index.html





CorporateGovernance

Business ethics







A semiotic square analysis of the concept of « good »

Good Bad

Benignness Indifference

Contrariety or opposition

Complementarity or implication

22/11/2014 32Patrick Gilormini

Legal, illegal and just

• Four categories of actions based on rightness

– Those that are legal to do but which the law does not require to be done

– Those that must be done or not done according to law

– Those that are illegal but may well be justified (i.e. a requirement of justice )

– Those that are just but illegal

Major issues in business ethics

ETHICSPrescribing the good life

MORALITYProscribing bad actions

GOODPositive action for good or to prevent harm being done

BENIGNAvoiding doing harm, supports the doing of good but takes no positive action to do good

INDIFFERENTIgnoring harm done by or to others and disregarding the rights of others

BADTaking action to do harmTaking no action to prevent harm being done

Social development and caring

Social responsibility and supporting

Reciprocity Fairness Lying and dishonesty

Cheating and selfishness

Bullying and socialirresponsi-bility

Harming and social environ-mentdisengage-ment

STAKEHOLDERS APPROACH TO BUSINESS AND SOCIETY RELATIONSHIPS

Part 1.2

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Who is a stakeholder ?

• « Any group or individual who can affect or is affected by the achievement of the organization’s objectives » Freeman , 1984

• « Bear some form of risk as a result of having invested some form of capital , human or financial , something of value, in a firm » or « is placed at risk as a result of a firm’s activity » Clarkson 1994


A firm’s stakeholders

• Constituents that have a stake in , or claim on , some aspects of a company’s products , operations , markets, industry and outcomes

• Individuals or groups who depend on the organisation to fulfill their own goals and on whom, in turn, the organisation depends


A firm’s stakeholders


Organizational Stakeholders

Employees, Managers, Shareholders, Unions

Economic Stakeholders

Customers, creditors, distributors, suppliers

Societal Stakeholders

Communities Government and

regulators, Nonprofits and NGO’s ,

Natural Environment

Globalization

Technologies

A sorting rationale for stakeholder identification


1. Firm and stakeholder are in relationship

2. The firm is dependant on the stakeholder

3. The stakeholder has power on the firm

4. Firm and stakeholder are in contractualrelationship

5. The stakeholder has a legitimate or moral claim on the firm

6. The stakeholder has something at risk

Stakeholder typology


URGENCY

LEGITIMACY

POWER

Dormant

Discretionary

Dominant

Definitive

Dependant

Demanding

Dangerous

Non StakeholderMitchell, Agle, Wood, 1997

What about a stakeholder theory?

Donaldson and Preston, 1995


• The stakeholder theory is descriptive : the corporation is a constellation of cooperative and competitive interest possessing intrinsic values.

• The stake holder theory is also instrumental : a framework for examining the connections between management practice and achievement of performance goals

• Its fundamental basis is normative:

– Stakeholders are identified by their interests in the corporation, whether the corporation has any corresponding functional interest in them

– Each group of stakeholders merits consideration for its own sake and not merely because of its ability to further the interests of some other groups , as the shareowners


• The stakeholder theory is managerial:

– it recommends attitudes, structures and practices

– It requires simultaneous attention to the legitimate interest of all legitimate stakeholders

• However :

– simultaneous attention to stakeholders interests does not resolve the longstanding problem of identifying and evaluating their “legitimate” stakes in the corporation

– Does not imply that all stakeholders should be equally involved in all processes or decisions

Donaldson and Preston, 1995

HARD LAW AND SOFT LAW IN FRANCEAND THE EUROPEAN UNION

Part 1,3

CSR between Hard law and Soft law

Hard law means binding laws. To constitute law, a rule, instrument or decision must be authoritative and prescriptive. In international law, hard law includes self-executing treaties or international agreements, as well as customary laws. These instruments result in legally enforceable commitments for countries (states) and other international subjects.Ex. conventions or international agreements

Soft law means commitments made by negotiating parties that are not legally binding.Ex. E.U. "codes of conduct", "guidelines", "communications"

Legislative process in E.U.

What is CSR ?


European Commission Green Paper “Promoting a European Framework for Corporate Social Responsibility” COM (2001) 366

• CSR as a concept whereby companies integratesocial and environmental concerns in theirbusiness operations and in their interactions with their stakeholders on a voluntary basis as they are increasingly aware that responsiblebehaviour leads to sustainable business success.

What is CSR in E.U.?


European Commission Green Paper “Promoting a European Framework for Corporate Social Responsibility” COM (2001) 366 :

• CSR is also about managing change at company level in a socially responsible manner. This happens when a company seeks to set the trade-offs between the requirements and the needs of the various stakeholders into a balance, which is acceptable to all parties. If companies succeed in managing change in a socially responsible manner, this will have a positive impact at the macro-economic level.

What is CSR in E.U. ?

A renewed EU strategy 2011-14 for Corporate Social Responsibility:

The Commission puts forward a new definition of CSR as “the responsibility of enterprises for their impacts on society”. Respect for applicable legislation, and for collective agreements between social partners, is a prerequisite for meeting that responsibility. To fully meet their corporate social responsibility, enterprises should have in place a process to integrate social, environmental, ethical, human rights and consumer concerns into their business operations and core strategy in close collaboration with their stakeholders, with the aim of:

– maximizing the creation of shared value for their owners/shareholders and for their other stakeholders and society at large;

– identifying, preventing and mitigating their possible adverse impacts.

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What does CSR involve in E.U. ?


• To maximize the creation of shared value, enterprises are encouraged to adopt a long-term,strategic approach to CSR, and to explore the opportunities for developing innovative products, services and business models that contribute to societal wellbeing and lead to higher quality and more productive jobs.

• To identify, prevent and mitigate their possible adverse impacts, large enterprises, and enterprises at particular risk of having such impacts, are encouraged to carry out risk-based due diligence, including through their supply chains.

• Certain types of enterprise, such as cooperatives, mutuals, and family-owned businesses, have ownership and governance structures that can be especially conducive to responsible business conduct.

• For most small and medium-sized enterprises, especially microenterprises,the CSR process is likely to remain informal and intuitive.

[COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN

ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS]

Reporting Policies among the European Member States

Reporting Policies among the European Member States

“comply or explain” approach: It requires companies to report how they comply with the “corporate governance code”, or to explain where and why not.

Legislative process in France

French CSR policy and legislation

• Laws regulating non-financial data in private bodies in France as early as 1977 with the Social Assesment Law (Bilan Social), which required listed companies to report on asset of social data.

• The Nouvelles Regulations Economiques (NRE) law passed in 2001, through article 116, makes reporting on social and environmental impacts mandatory for listed companies. the NRE law has acted as an impulse for non-financial reporting.

• The combination of both volunteer and legal actions, and the necessity to give a global answer to all the stakeholders gave a great impetus these last five years to non-financial reporting and CSR policies.

National Sustainable Development Strategy

• The first national sustainable development strategy was set in motion on 3 June 2003 by the Raffarin government, for a period of five years.

• It was revised and renewed in 2008 for a further five years, building on the experience and outcomes of the first period of implementation.

• The new national sustainable development strategy for the 2010-2013 period was adopted on 27 July 2010 by the Inter-Ministerial Committee for Sustainable Development.

• This 2010-2013 national sustainable development strategy is centred on nine strategic issues: sustainable consumption and production -knowledge society - governance - climate change and energy -sustainable transport and mobility - conservation and sustainable management of biodiversity and natural resources - public health, risk management and prevention - demography, immigration and social inclusion - and international challenges relating to sustainable development and the fight against poverty in the world.

The Grenelle Environment Round Table

• Launched in 2007, the Grenelle Environment Round Table comprises a series of meetings between the State and representatives of civil society (local authorities, NGOs, employers and workers) aiming to arrive at long term decisions regarding sustainable development.

• A total of 268 commitments have arisen from the GrenelleEnvironment Round Table.

• Between 2008 and 2010, the Parliament adopted the texts that were required to turn these commitments into effective legislation: the "Grenelle I Act" (promulgated 3 August 2009) and the "Grenelle II Act" (promulgated 12 July 2010). Article 53 of the "Grenelle I Act" and Articles 224-225 of the "Grenelle II Act" cover matters of governance, reporting and SRI.

New CSR reporting obligation with article 225 of 12 July 2010

The article 225 requires a CSR reporting obligation:

- for listed companies

- for others companies (number of employees and balance sheet total is defined by a decree of the State Council (Conseil d'Etat))

It also includes information on the way in which society takes account of the social and environmental consequences of its activity as well as its societal commitments for sustainable development.

The staff representative institutions and stakeholders participating in dialogue with the companies can put forward their opinion on the approach of corporate social, environmental and societal responsibility as a supplement to the indicators presented.

The social and environmental information with regard to legal and regulatory information is subject to verification by an independent third-party body, according to terms set by Conseil d'Etat decree. This verification gives rise to a recommendation which is sent to the shareholders' or members' meeting at the same time as the report of the board of directors or executive board.

Several State Council (Conseil d'Etat) decrees enforce this article.

Other regulatory initiatives

• Diversity is also the object of regulations as a series of law recommended companies to negotiate agreements with trade unions on gender equality. In March 2006, a law proposes to reduce the salary gap between men and women by 2010. In case of no respect of this engagement there should be some financial sanctions.

• Equally, a quota of 6% of disabled people should be respected in the staff of companies with more than 20 employees.

Key drivers of CSR in France

• The emergence of CSR in France is the result of the consequences of globalization and the influence of foreign corporations as well as the successful development of the French socially responsible investment (SRI) market.

• The development of the SRI market is reflected in the strong growth in SRI assets under management (AuM) and mandates in France, increasing from €3.9 billion in 2003 to €169.7 billion in 2013.