CORPORATE SOCIAL RESPONSIBILITY

2013-2014 Lecture 4 and 5

What is the role of business ?

Role of Business

To innovate & deliver products and services

To use resources efficiently so that value is created

To conduct operations so that they are performed profitable & accepted by society

Responsibilities of Business
Philanthropic Responsibilities
Be a good corporate citizen Operate ethically
Contribute resources to the Community; improve quality of life Obligation of doing what is right, just and fair. Avoid harm

Ethical Responsibilities

Obey the law

Legal Responsibilities

Law is societys codification of right or wrong. Play by the rules of the game
Without sustainable viability all other actions are not possible

Be Profitable

Economic Responsibilities

The Pyramid of Corporate Social responsibility Source : Caroll, 1991

Responsibilities Of Business

Ethical

Altruistic

Strategic

Allegations About Business .

Little concern for the consumers

Cares nothing about the deteriorating social order

Has no concept of acceptable social behaviour

Indifferent to the problems of minorities and the environment.

Does the firm have a social responsibility ?

Yes !!!
Business creates problems and should therefore help solve them Social issues are in the realm of public policy ie. Government action

Corporations are citizens in our society Business often has the resources necessary to solve problems

Social Responsibility

Managers are not trained to make public policy decisions

Restricts the free market goal of profit maximization and dilutes the primary aim of business Limits the firms ability to compete in a global marketplace

Business is a partner in our society, along with the government and the general population

To whom are businesses responsible?

Origins of the Stakeholder Concept

What is a stake?

An interest or a share in an undertaking and can be categorized as:

Interest Right Legal Ownership

Moral

Stakeholder is an individual(s)/ group (s) who possesses a stake

Definition of Stakeholders
Groups and individuals who benefit from or are harmed by , and whose rights are violated or respected by, corporate action. They can be seen as being either external to the organization, or internal But some may be both!

Who Are Business Stakeholders?

Production and Managerial Views

Typology of Stakeholders
Primary or market stakeholders Secondary or non market stakeholders

those who engage in economic transaction with the company as it carries out its primary purpose of providing society with goods and services.

those who do not engage in direct economic exchange with the firm but are affected by or can affect the firm through its actions.

Relations between a business firm and its primary stakeholders

Employees (Unions)
Wholesalers (Retailers)
Distribute products Sell labor

Stockholders
Invest capital Lend money

Buy products

Business firm (Managers)

Creditors

Customers
Sell materials

Suppliers

Relations between a business firm and some of its other (secondary) stakeholders
The General Public
Local Communities
Positive, negative opinion Jobs, environment

Governments
Central/State Regulation, and Local Taxes Friendly, hostile

Business Support Groups

Advice, research Image, publicity

Business Firm (Managers)

Social demands

Media

Social Activist Groups

Attributes of a Stakeholder
Legitimacy refers to the perceived validity of the stakeholders claim to a stake

Power refers to the ability or capacity of a stakeholder to produce an effect

Urgency refers to the degree to which the stakeholders claim demands immediate attention

Stakeholder Mapping : Typology based on Attributes

Laid off workers who could have hate towards their former employer and voice their opinions on radio or TV.
Employees who are involved in wildcat strikes or sabotage, or interest group terrorism or blockages.

Power
Typology of Stakeholders
1 Dormant Stakeholder 5 4 Dangerous Dominant Stakeholder Stakeholder 7 Definitive Stakeholder 6 Dependent Stakeholder

Latent

Expectant
Definitive Shareholders and creditors who expect to receive managements attention

Legitimacy
2 Discretionary Stakeholder

Urgency
lonely protester outside the companys headquarters

3 Demanding Stakeholder

Citizens that have suffered damage due to companys mistake

Stakeholder Typology: One, Two or Three Attributes present. Mitchell, Agle & Wood, 1997

Shareholders voting to replace management.

schools and nonprofit organizations that receive donations and voluntary labor.

Stakeholder mapping : Power Interest grid

WHAT DO YOU THINK IS CSR?

Conceptual Clarity

Corporate Social Responsibility

World Business Council for Sustainable Development Business for Social Responsibility The European Commission CSR Network Corporate Social Responsibility 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. Operating a business in a manner that meets or exceeds the ethical, legal, commercial and public expectations that society has of business. A concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis. CSR is about how businesses align their values and behaviour with the expectations and needs of stakeholders - not just customers and investors, but also employees, suppliers, communities, regulators, special interest groups and society as a whole. It describes a company's commitment to be accountable to its stakeholders.

No universal definition of CSR but the common understanding amongst most of these definitions concern with how the profits are made and how they are used, keeping in mind the interests of all stakeholders.

The broad span of CSR

At one end corporate policies are required for good management practice within and outside the organizations ---At the other hand charitable activities ethical investments environmental protection
Former do not need any CSR defense
Latter can be critical for a company

What is the business case for CSR?

Business Case for CSR

Create shareholder value Strategic branding

Operational efficiency
Access to new markets Better access to capital Retention of human and intellectual capital

Lower business risk

Stages in Evolution of CSR

Obey the law & make money for owners and stockhol ders

Businesses must also be ethical in the ways they make money and not engage in bribery, fraud or corruption.

Businesses must also protect the environment and biodiversity.

Businesses must also protect and promote human rights, labour rights, and sustainable development. (triple bottom line)

Businesses must adhere to a global standard for CSR enforced by law.

WHAT HAS BEEN THE APPROACH OF BUSINESS TO ADDRESS LIABILITIES THAT IT CREATED?

Traditional Approach: Philanthropy

Philanthropy: Rose to heights in 1990s Investment of huge amount of money for social causes

Bill & Melinda Gates foundation : HIV/AIDS Awareness generation: World wide

Philanthropic Activities not a part of main business activities but may add commercial value through reputation enhancement

Strategic Philanthropy
Charitable contribution to address a variety of social, economic and other issues as a part of their overall corporate citizen strategy. Significant contributions in their local communities.

CSR
Strategy goes beyond best practices.

It is about choosing a unique position: doing things differently from competitors in a way that lowers costs or better serves a particular set of customer needs.
CSR moves beyond good corporate citizenship.

CSR involves both inside-out and outside-in dimensions working in tandem: opportunities of shared value

WHAT IS THE DIFFERENCE BETWEEN PHILANTHROPY, STRATEGIC PHILANTHROPY & CSR?

Philanthropy
Altruistic

Strategic Philanthropy
Win-Win Situation

CSR
Essential way of doing good business Stakeholder Centric Investment & Return Centric

Love for Mankind No Financial Returns but may give FEEL GOOD FACTOR feeling May Enhance Brand Image over a period

Can give Financial Returns Brand Image Enhancement

Calculative- Potentials to create new markets

Potentials to create high Shareholder & Societal value Sustainability Agenda

Example : Asha Daan

Example : HUL Project Shakti

CAN PHILANTHROPY AND CORPORATE PHILANTHROPY ADDRESS ALL ISSUES?

What are the other stakeholder issues which businesses have to address?

The Issues
Marketplace Impact on society of core products and services Issues around buying and selling Supply chain Vulnerable customers Workplace Workforce diversity Work-life balance health and safety human rights training and lifelong learning

Environment Emissions to air, land and water Use of natural resources Environmental risk Transport impacts Impact on environment of core products and services

Community Impact on local operations on the community Business investment in community

What are the various areas of SR of business?

Marketplace Customer satisfaction levels Advertising complaints upheld Upheld cases of anti-competitive behaviour Average time to pay bills Social impact of goods / services Workplace Workforce profile Staff absenteeism / grievances Pay and conditions compared against local equivalent averages Perception measures

Environment Energy consumption Water usage Solid waste produced Greenhouse gas emissions Impact of goods / services

Community Cash value of community support Value of staff time and in kind support Leverage of other resources Perception measures - company as good neighbour

Triple Bottom Line Approach

TBL

Triple bottom line thinking holds that a company should combine standard metrics of financial success with those that measure environmental stewardship and social justice.

It is sometimes called the 3P approach -- People, Planet and Profits. In each case it requires thinking in three dimensions, not one.

Socially Responsible Investment (SRI)

An investment that is considered socially responsible because of the nature of the business the company conducts. SRI considers both the investor's financial needs and an investments impact on society. SRI investors encourage corporations to improve their practices on environmental, social, and governance issues.