CSR Beyond the Mainstream - Seminar 6 PDF

CSR Beyond the Mainstream Seminar 6 S ta k e ho ld e r e n g a g e m e nt a nd in no v a tion for s us ta in a b le b us in e s s m od e ls D r S a m e nth a G oe tha ls Outline Quiz based on seminar 5 Part 1 - Lecture principles of sustainable business...

CSR Beyond the Mainstream Seminar 6 S ta k e ho ld e r e n g a g e m e nt a nd in no v a tion for s us ta in a b le b us in e s s m od e ls D r S a m e nth a G oe tha ls Outline Quiz based on seminar 5 Part 1 - Lecture principles of sustainable business models stakeholder engagement innovation & entrepreneurship Part 2 - Activity Orathai, Stakeholder engagement in the outer space Key words: Business model innovation, stakeholders, business as a set of relationship, relational responsibilities, meaningful stakeholder engagement Chapters 4 and 19 Key competencies Collaborating across diverse perspectives to co-create solutions and innovative business models for sustainability Quiz based on seminar 5 For instructors’ attention See questions suggestions in the slide’s notes Create your own quiz on K2 or forms Dedicate 10min at start of class Part of individual assessment and final grade Part 1 Business model innovation and statekholder engagement for sustainability  Think Recall: Friedman’s1970 doctrine of companies’ sole responsibility to shareholders (see session 3) What kind of business model does this doctrine speaks to and/or leads to…?  Business Model Innovation for Sustainability – Overview Chapter 19 Why Think About Business Models? Business models describe (conceptually) and influence (practically) how companies create, propose, deliver and capture value. Value creation, in turn, relates in manifold ways to the natural environment and society. A conceptual definition: ‘A On a practical level, business business model describes models refer to what how an organisation creates, companies do and the delivers, and captures value characteristics they have. based on a particular value Business models describe (conceptually) and influence (practically) proposition.’ how companies create, propose, deliver and capture value. If we are able to describe and understand how companies do this, we should Osterwalder & Pigneur, 2009: 14 also be able to describe and understand how companies can create ecological and social value in conjunction with financial and customer value – that is, how companies can engage in sustainable value creation  What Is a Business Model for Sustainability and Innovation? By combining both notions, on the one hand an entrepreneurial and innovative stance on corporate sustainability, and on the other hand business models as an expression of how companies create value, we get to two core concepts… Business model Business Model for Sustainability… Business Model Innovation for innovation typically involves more complex Sustainability… and more systemic is about solving ecological and social changes and challenges. challenges through the value creation helps companies to create value for activities of a company. A company themselves and their stakeholders and operating a (theoretically) perfectly to preserve or maybe even regenerate sustainable business model would the natural environment, i.e., to create restore the natural environment, create sustainable value. social value, and make a profit with every product or service it sells.. A business model for sustainability helps describing, analyzing, managing, and communicating a company’s sustainable value proposition to its customers, and all other stakeholders, how it creates and delivers this value, and how it captures economic value while maintaining or regenerating natural, social, and economic capital beyond its organisational boundaries' for example, new production processes, supply chains, products or services. And at the same time, it is about doing no harm to the natural environment and communities  Four Guiding Principles of Business Model Innovation for Sustainability Stakeholders Theory (Freeman 1984 onwards) Confronts the shareholder-primacy view that inhibits managers’ attention to social issues Understands business as a set of relationships Businesses should create value for all their stakeholders – those who can affect or be affected by the realization of an organization’s purpose (the wide definition) or those without whose support the organization would not exist (the narrow definition) The composition of stakeholders may differ depending on a company’s industry and business model… The firm and its primary and secondary stakeholders are interdependent Chapter 4  Stakeholder Theory The theory was developed to solve three Stakeholder theory argues that all main problems… organisations exist within a set of relationships, interactions and How is value creation and trade interdependencies involving a 1 possible in fast-changing environments variety of different groups and that have little stability? individuals. How do we understand the ethics of These “stakeholders” both affect, 2 capitalism, and how can we put and are affected by, an organisation capitalism on firmer ethical ground? and the achievement of its objectives. What should we teach in business 3 schools?  Defining Stakeholders We can define ‘stakeholder’ in a number of ways. Business, large or A stakeholder is any Mitchell et al. (1997: small, is about group or individual 277) ask ‘which groups creating value for that can affect or be are … deserving or those groups without affected by the requiring of whose support, the realisation of an management attention, business would cease organisation’s and which are not?’ to be viable (primary purpose (secondary Who gets this attention, stakeholders) stakeholders) when, and how much attention they get is not fixed. Business as Relationships Among Stakeholders Stakeholder theory provides a novel, useful and impactful lens through which to view organisations, and opens up many exciting possibilities in terms of reorienting the relationship between business, society and nature. Business can be understood as a Stakeholder theory considers Stakeholder theory considers set of relationships among the dynamic relationships the question of what groups that have a stake in the between groups and individuals characteristics a activities that make up the who affect and are affected by group/individual must have business. Business is about how an organisation, usually but not to be considered to hold a customers, suppliers, employees, always a for-profit business, and ‘stake’ in the actions and financiers (stockholders, its decision-making processes. outcomes of an organisation. bondholders, banks, etc.), communities and managers interact and create value. Identifying Stakeholders Act Act To identify stakeholders an organization should ask itself the following questions: ⎯ To whom does the organization have legal obligations? ⎯ Who might be positively or negatively affected by the organization's decisions or activities? ⎯ Who is likely to express concerns about the decisions and activities of the organization? ⎯ Who has been involved in the past when similar concerns needed to be addressed? ⎯ Who can help the organization address specific impacts? ⎯ Who can affect the organization's ability to meet its responsibilities? ⎯ Who would be disadvantaged if excluded from the engagement? ⎯ Who in the value chain is affected? Example: Fair Wear Foundation garment sector stakeholders  Act Evaluate your ‘sphere of influence” and identify all stakeholders An organization derives influence from sources such as: ⎯ ownership and governance ⎯ economic relationship ⎯ legal/political authority ⎯ public opinion Example ABN AMRO (Dutch Bank leverage over cocoa supply chain) Engaging Stakeholders Act Act What is stakeholder engagement? Dialogue between the organization and its stakeholders It provides an informed basis for its decisions What does it look like? Can be informal or formal Wide variety of formats: individual meetings, conferences, workshops, public hearings, round-table discussions, advisory committees, consultation procedures, collective bargaining and web-based forums. It is interactive and is intended to be two-way communication Fair and proper process is important: An organization should not neglect stakeholders who are silent An organization should strive to partner with independent parties An organization should transparently disclose financial ties and support with any parties  Stakeholders in sustainability due diligence (SDD) approach (see session 3 and 5) Affected stakeholders who are negatively affected by the activities of the business or that of its business partners Business partners who are involved in the harm by causing it, contributing to it, or otherwise being involved through their own operations, products or services or those of their business partners. > The lead company has leverage over them to change the situation > Pierces the corporate veil limiting responsibility  Affected stakeholders, Rights-holders in Sustainability Due Diligence Identifying affected-stakeholders/rights- 3 groups to consider especially holders Potentially affected stakeholders and their legitimate representatives Credible proxies who have a sufficiently deep experience in engaging with affected stakeholders Human Rights experts for how the company can effectively manage human rights (not a replacement for affected stakeholders) Why introduce the concept of rights-holders? What does it change, adds to affected stakeholders? Oxfam identification of stakeholders in the textile and extractive sectors: who are they usual stakeholders or rights-holders? Workers workers in in the the factory company Local Local authorities Suppliers authorities Farmers Stakeholders Stakeholders in the textile in the sector extractive sector Children Indigenous Unions and people and Artisanal adolescents local communities miners Human rights women and environmental defenders  Stakeholders: Sustainability due diligence vs business as usual perspective In small groups, map a company’s stakeholders from a management Explain why they differ perspective and from a sustainability perspective Interact  Drivers of meaningful stakeholder engagement from a business perspective Meaningful engagement benefits: Ineffectual engagement risks: Better-informed decisions and a reduction in the Negative human rights impacts due to a failure to severity of impacts address stakeholder concerns early and Develop trust with affected stakeholders from the effectively before they escalate start Stakeholders feel used if only consulted when the Improve the quality of analysis of human rights company needs it, and their needs and voice are impacts not reflected in decision making > mistrust Understand power dynamics and interests of different stakeholders THE BUSINESS CASE Ability to prioritise those impacts, without the company making those decisions alone Reputational and governance risks Understand how to manage identified impacts Divestment from investors Costs of remedy Create co-ownership of necessary solutions Loss of social license to operate Loss of business partners (for suppliers)  Participation: Interests, Knowledge, and Power challenges Significant imbalance of power Power dynamics at play within between large companies, their Power dynamics between rights- affected communities, they are not business stakeholders and people holders, those who represent them, homogenous > roles of women and affected by their activities and companies and state actors and men in family, work and social relationships (e.g. government, between the people in the structures, understanding of investors, competitors, people with assessment team vulnerability based on analysis of influence) contextual circumstances Adequate responses should be Whose knowledge is accepted: Whose interests are prioritized highly culture sensitive and the expert, scientific, experience of between the company and the process must be informed by affected people? multitude of stakeholders knowledge of local culture, gender, values, customs Think  Act Oxfam meaningful participation in Sustainability Due Diligence Early and ongoing participation Informed Participation Meaningful participation in HRDD Facilitated and safe participation Inclusive Participation  Managerial and Reactionary Passive Entrepreneurial Views on Corporate Sustainability Reactionary views: Sustainability is not part of the duty of managers beyond what is legally required Passive views: Companies as regulation takers, process optimisers and as adapters to Active Proactive societal pressures from various stakeholders Active views: Sustainability engagement is seen as a field to express the strive for highest quality while applying the best available technologies and implementing best practices Proactive perspectives: Broaden the management scope of sustainability engagement even more towards actively contributing to solving grand sustainability challenges Chapter 19 Innovation as a Means to Achieve Corporate Sustainability 1 2 3 Innovation in processes Innovation in products Innovation in services Improves companies’ capabilities Gives new capabilities to Alters the capabilities of suppliers to produce with different or even customers (e.g., capability to to interact with their customers less resources and less ecological repair and maintain products) (e.g., by adding new services to harm existing physical products), that is For example, Fairphone offers Process improvements that modular smartphones; screens by moving towards product- reduce resource consumption are batteries, and other components service systems an almost natural approach for can be replaced so that the For instance, moving from owning most companies. Less resource lifetime of the product can be to sharing cars, and combining consumption typically means extended by the customers with public transportation systems reduced production costs. themselves The Value Mapping Tool Considers Multiple Forms of Value Allows mixed stakeholder groups to engage in processes of value proposition design Considers multiple forms of value (e.g., value for customers, value for suppliers or value in ecological and social terms) This helps companies to create more sustainable value propositions. Adapted and modified from Bocken et al., 2013 Act  Act The Flourishing Business Canvas Positions the business model within its wider ecological, societal and economic environments Considers all normative guiding principles of sustainable business model innovation and emphasises the various relationships between business activities and their ecological and social contexts in a very clear way http://www.flourishingbusiness.org/ Case study: Veja innovating for sustainability Disclaimer we are not promoters of the brand! But it is a good case study for this class! Watch this 10min clip https://project.veja-store.com/en Group A (half the class on my right) take notes to analyse the case using the Value Mapping Tool and questions on the next slide, then 5min debrief with peers to come up with a collective set of answers Group B (half the class on my left) take notes to analyse the case using the Flourishing Business Canvas and questions on the next slide, then 5min debrief with peers to come up with a collective set of answers Debrief 10 min share findings, compare insights from the two frameworks and discuss practical takeaways for sustainable business models. Interact Group A: Flourishing Business Group B: Bocken’s Value Mapping Canvas Tool Value Co-Creation: Value Captured: How does Veja create value for stakeholders What benefits does Veja’s model currently such as rubber-tappers, cooperatives, deliver to its stakeholders and the consumers, and the environment? environment? Environmental and Social Impact: Value Missed: What are the positive and negative What opportunities for improvement or environmental and social impacts of Veja’s expansion (e.g., scaling, diversifying income rubber sourcing model? sources) are not being fully utilized? Sustainable Innovation: Value Destroyed: What innovative practices or strategies make Are there any negative consequences of Veja’s Veja’s business model sustainable? model, such as dependence on premium pricing or barriers to scaling? Stakeholder Engagement: How does Veja involve stakeholders in its New Value Opportunities: decision-making and operations? What additional strategies or innovations could Veja pursue to increase sustainability and impact? Take aways on business model innovation for sustainability Business model innovation for sustainability can help companies create value for themselves and their stakeholders and preserve the natural environment, i.e., to engage in sustainable value creation Innovation alters the ability of companies to act, and hence their ability to integrate ecological and social concerns into their business activities There are various types of business models for sustainability which are supported by the notion of business model pattern as well as various tools available for their development  Take aways on stakeholder engagement Stakeholder theory is ‘first, and most fundamentally, a moral theory that specifies the obligations that companies have to their stakeholders’ (Freeman et al., 2010: 212). The age of sustainability makes stakeholder mapping, engagement and ongoing dialogue more critical than ever before, due to the scale and urgency of the challenges facing our planet. Companies do not exist in isolation. Continued relevance, and survival, means they must understand, and proactively engage with their stakeholders, and implement effective stakeholder management. Orathai Role Play Part 2 Role play Refer to the instructions available in K2 folder session 6 ‘Orathai Role Play’ See Canva https://www.canva.com/design/DAGZWN1nP0 M/9cgz18hfnnvHHembTT6rXQ/edit