CSR Book Chapter 1 PDF

**CSR BOOK** **CHAPTER 1** **CHANGING CONTEXT FOR BUSINESS, SOCIETIES AND NATURE** 1. Increasing relevance of ESG: Environmental, Social, Governance. **Environmental**: greenhouse gas emissions, freshwater supply, pollution. A group of international researches called "Planetary Bou...

**CSR BOOK** **CHAPTER 1** **CHANGING CONTEXT FOR BUSINESS, SOCIETIES AND NATURE** 1. Increasing relevance of ESG: Environmental, Social, Governance. **Environmental**: greenhouse gas emissions, freshwater supply, pollution. A group of international researches called "Planetary Boundaries" have specified that there are boundaries that define specific threshold at global and regional level. 4/9 boundaries are transgressed (slides says 5/9) Trasgressed boundaries: - Climate - Biodiversity - Biogeochemical flows/cycles (use of nitrogen in fertilizer) - Land (deforestation) - (Novel Entities)=plastic pollution. **RISING SCALE AND SCOPE OF CORPORATE ACTIVITIES** Business are entwined with ESG challenges. Nowadays we are dealing with corporations that ave increased their scope and size, they have become really powerful and, in certain cases, they produce most of the products for an industry. Big corporations have also started controlling domains which were previously controlled by the state (water, security, education, healthcare). In the prior research, big corporations=keystone actors KEYSTONE ACTORS: 1. Dominate volume of production within a sector 2. Connect different ecosystems across the globe through a series of subsidiaries 3. Have an impact on global governance processes. However, let's not forget that there is a plurality of corporate actors, especially when we think about sustainability and responsibility. Most of the firms in the economy are SMEs, that are the backbone of our economy. **DATAFICATION AND DIGITALIZATION:** **Def Datafication and Digitalization**: Increased public scrutiny has made ir(reponsible) conduct more transparent; tech firms also contribute to ESG problems (e.g., CO2 emissions). TO DATAFY= put it into a quantified format so that it can be analysed through digital means. On the one hand, the rise of the digital economy has increased public scrutiny and has made responsible as well as irresponsible corporate conduct more transparent. Datafication has increased the connectivity of people who share more content in faster ways. On the other hand, datafication has created new powerful corporations with a new set of responsibilities. Tech giants like Apple, Google, Microsoft and Facebook belong to the most valuable corporations in the world (when comparing the market capitalisation of all). **GLOBALISATION AND LACK OF GLOBAL GOVERNANCE** **Def Globalisation and (the Lack of Global Governance)**: firms often escape national regulation due to the international nature of value chains (causing a regulatory vacuum). Regulatory Vacuum Effect: There is an imbalance between the flexibility of MNCs to spread their value chain activities across different countries and the still limited capacity of nation states and international governmental organisations to adequately regulate corporate conduct across borders. Existing international governmental organisations, which reach beyond individual nation states (e.g., the UN system or the World Bank), lack the formal powers or political support to develop and enforce any binding rules or even sanction corporate misconduct. Some have argued that the missing direct applicability of international law to corporations can partly be compensated by stronger [extraterritorial regulation]. Extraterritorial jurisdiction refers to \'the ability of a state, via various legal, regulatory and judicial institutions, to exercise its authority over actors and activities outside its own territory\'. There Exist: 1. CORPORATE SUSTAINABILITY 2. CORPORATE SOCIAL RESPONSIBILITY 3. BUSINESS ETHICS **1.CORPORATE SUSTAINABILITY** (context enterprise activity seen in a larger system): focuses on managing and balancing an enterprise's embeddedness in interrelated ecological, social and economic systems so that positive impact is created in the form of LT ecological balance, societal welfare and stakeholder value. The ecological, social and economic system interact with each other. Corp. Sustainability balancing social, environmental and economic interests while doing business. It avoids situations in which taking actions in favor of one sphere comes at the expense of another sphere. Corp sustainability also concerned with ecological balance, societal welfare and stakeholder value. While the corporate sustainability debate emphasizes the need for systems-level change **VS CORPORATE SOCIAL R.** discussions around CSR are often more focused on relevant management practices within corporations. CSR does not neglect the connected nature of social, environmental and economic aspects, but its main focus is on how to manage these aspects in a corporate context and regarding the impact of corporations on the social, environmental and economic circumstances of their stakeholders. Corporate Sustainability puts more emphasis on how changes made by an individual corporation connect and contribute to larger systems-level change. **2.CORPORATE SOCIAL RESPONSIBILITY:** refers to the integration of an enterprise's social, environmental, ethical and philanthropic responsibilities towards society into its operations, processes and core business strategy in cooperation with relevant stakeholders in a context-specific way. Well-designed CSR goes into the very core of a corporation; it influences its everyday practices and business processes and is aligned with its overall business strategy. CSR should be embedded into a firm's purpose and what it does on a day-to-day basis, and it should also be reflected upon when deciding upon a firm's strategic direction (e.g., which markets or regions it wants to enter). CARROL'S PYRAMID A diagram of a pyramid Description automatically generated **BUSINESS ETHICS** **DEF business ethics:** The study of business situations, activities, and decisions where issues of right and wrong are addressed. While corporate sustainability stresses how changes made by firms connect and contribute to larger systems-level change and CSR focuses on relevant management practices, business ethics is more concerned with questions of right and wrong in the context of business situations Business ethics focuses exclusively on moral judgments. Such judgments are usually informed by a certain moral point of view, such as different philosophical, social or religious perspectives. Ethical reflection goes beyond the law. Business ethics is also concerned with those situations where values are unclear, in conflict or in tension and ethical dilemmas occur as a result RECAP  **ESG: ENVIRONMENTAL, SOCIAL, GOVERNANCE** A screenshot of a computer Description automatically generated **SUSTAINABLE DEVELOPMENT GOALS (SDG)** **DEF SDG (2015)**: Another widely used framework are the UN-backed Sustainable Development Goals (SDGs). The SDGs focus on sustainable development as a whole and not corporate sustainability specifically. The [SDGs] were [developed] to establish goals [for national governments] and address a much broader audience than just corporations. They will last till 2030.  WHY DO CORPORATIONS ENGAGE IN SUSTAINABILITY? A diagram of a company motivation Description automatically generated **INSTRUMENTAL MOTIVATION**: "it pays to be sustainable". This is the most widely reason for engaging in corporate sustainability, so called "business case". Some corporations create on purpose sustainable policies and practices because they believe it can influence positively their financial bottom line. The UN Global Compact and the Principles for Responsible Investment (2013) have identified three categories of value drivers that influence how firms' ESG performance and their financial performance are linked: revenue growth, productivity improvement and risk minimization. 1. **Revenue growth**: Some firms profit from sustainability financially because their ESG activities result in innovative products and services, which in turn improve revenue growth In some cases, firms can expand their market share and customer base for existing products based on enhancing these with social and environmental features. 2. **Productivity improvement**: Well-managed ESG practices can also lead to productivity improvements 3. **Risk minimisation**: sustainability can enable companies to minimise business risks and hence better connect with investors. Risk minimisation can occur in different areas, such as regulatory risks and supply chain risks.  **ETHICAL MOTIVATION: IT IS THE RIGHT THING TO DO?** Some firms engage in corporate sustainability because it is quite simply the right thing to do. We call this motivation the moral case for corporate sustainability. BUSINESS RESPONSIBILITY= \"the obligations of businessmen to pursue those policies, to make those decisions, or to follow those lines of actions which are desirable in terms of the objectives and values of our society.\" SLIDES: INTRODUCTION WHAT IS MANAGEMENT? 1. Input: materials, suppliers, energy, information, customers, staff, equipment, transport, facilities. 2. Process: process flow, process design, work in progress, planning and scheduling, progressing and control, system improvement. 3. Output: products and services, unit cost (profitability), customer satisfaction, environmental impact 1. Input goals, resources, people 2. Process Efficiency / Effectiveness Efficiency: Minimal waste and expenses. Optimizing processes, materials and human resources to reduce costs and environmental impact. DOING THINGS RIGHT Effectiveness: a company meets its CSR goals and makes a meaningful impact on its stakeholders, including the environment, employees, communities, and shareholders. It focuses on the outcomes of CSR initiatives. DOING THE RIGHT THING 3. Output Performance **Efficiency** and **effectiveness** as responsibility includes asking: How much value is created---or harm avoided--- in the achievement of goals? Focusing on all stakeholders is key? To understand and to take purposeful action requires **responsible management competencies**. **COMPETENCIES NEEDED** 1+2=connections across space and time. 3+4=people, processes and participation. 1. SOCIAL-ECOLOGICAL THINKING: society and nature deeply interconnected, each one shapes and sustains the other. How are the parts connected? 2. FUTURES LITERACY: anticipate and envision future possibilities to inform today's decisions. 3. STAKEHOLDER INNOVATION: collaborate with stakeholders to experiment and to innovate shared solutions. 4. ETHICAL AND RESPONSIBLE LEADERSHIP: lead with integrity and accountability, consider the broader impact of decisions. **SOCIAL ECOLOGICAL THINKING** DEF. Social-ecological thinking sees society and nature as deeply interconnected systems, each shaping and sustaining the other. Systems belong to the social-ecological thinking. Def system=[perceived whole, whose elements are deeply interconnected.] Systems are subjects to various forces and feedback mechanisms. Understanding how a system works is done through **Systems Analysis.** PICTURE: When doing the first, instead of seeing the wider surroundings we focus solely on one aspect. This may seem completely wrong, and nevertheless sometimes it is indeed better to focus on just one part in order to take action. Otherwise we might get caught in endless evaluation processes instead of doing something. This is called analysis paralysis. TYPES OF SYSTEMS: 1. SOCIAL SYSTEM: plurality of [actors] who are [engaged in] a more or less stable [interaction], according to shared cultural norms and meanings. [Individuals=Interacting Units.] These units may be groups or organizations of individuals within the system. [An individual may belong to multiple social systems at once. ] Example of social systems: family units, communities, cities, nations, college campuses, corporations or industries. 2. ECONOMIC SYSTEM: set of institutions created for the making and implementation of decisions in the spheres of production, income and consumption in a given geographical area. It includes all the institutions, organizations, laws, rules, traditions...behavioural patterns that directly or indirectly affect economic behaviour and outcomes. 3. ENVIRONMENTAL/ECOLOGICAL SYSTEMS: life interacts with the various abiotic components found in the atmosphere, hydrosphere and litiosphere. Environmenral systems also include energy capture, storage, movement and use that's why they are called as Energy Systems **DEF SUSTAINABLE DEVELOPMENT**: a "development that meets the needs of the present without compromising the ability of future generations to meet their own needs" **SOCIAL-ECOLOGICAL SYSTEM** (SDG 11: sustainable cities and communities) Def: "integrated complex system that includes social (human) and ecological (nature) subsystems in a two-way feedback relationship. The delineation between social and ecological systems is artificial and arbitrary Social=Human dimension: the economic, political, technological, and cultural Ecological=all living beings and their relationships: humans & human actions, interplay with atmosphere, water cycle, biogeochemical cycles, & the dynamics of the Earth system SOCIAL ECOLOGICAL SYSTEMS - all humanly used resources are embedded in complex social-ecological systems - coupled human--environment systems - interacting and interdependent physical, biological and social components - integrates a diversity of disciplines & knowledges COMPETENCE 2: FUTURES LITERACY= anticipate and envision future possibilities to inform today's decisions Def. FORESIGHT: Foresight tries to [answer] such [questions] by [fostering dialogue] between citizens, scientists, business, policy-makers and, in general, stakeholders of any kind. This way they [create shared visions], develop strategies and implement recommended actions based on the conviction that [the future can be influenced] strategically. FORESIGHTS aims to provide the means to [guide, develop and shape] research, technology and innovation policies and strategies. 1. Foresight for policy: Foresight helps prepare policies and policy measures. It is used to support priority-setting and identify critical technologies that guide governmental investments 2. Foresight for business: Foresight in business aims to enable companies to detect discontinuous change early, interpret the consequences that has for them and formulate effective responses to ensure long-term survival and success. 3. Foresight for research The aim of Foresight for science is to identify promising avenues of research and orientate the scientific community towards priorities, thus fostering sustainable development in the long term. DECISION MAKING IN POLICY, RESEARCH AND BUSINESS All over the world there are governments, research organisations and companies that have decided to improve decision-making using methodologies that embrace the idea of an ever more complex reality Specifically: \- They have started to experiment with strategic foresight processes that deliberately cut across traditional boundaries of thematic areas and departments. \- Decision-makers are beginning to take a cross - disciplinary look on issues when incorporate these processes into their research, business or policy agendas. This enhances their activity on the strategic level DEF. STRATEGIC FORESIGHT: [providing foreknowledge] to someone who wants to win a political, innovation or business battle. How strategic foresight can contribute to decision-making? 1. Gathering foreknowledge: gather knowledge of [changes in trends] and potential new emerging [issues and risks] that should be addressed. 2. Broadening strategy focus: cutting across traditional boundaries of thematic areas, to obtain a holistic understanding of the societal needs and impacts. 3. Enhancing mindsets of decision-makers: help decision-makers formulate better informed and better prepared future visions and strategies. Why foresight is important for responsible management Sustainability is at the heart of responsible management Sustainability is inherently future-oriented, but the actions and policies must be determined and implemented in the present COMPETENCY 3: STAKEHOLDER INNOVATION: Collaborate with stakeholders to experiment, to innovate shared solutions. Shift from top-down to decentralized, existence of collaborative models in supply chain management, making stakeholder engagement a core leadership skill. **Stakeholder Theory** Stakeholder theory argues that all organisations exist within a set of relationships, interactions and interdependencies involving a variety of different groups and individuals. "stakeholders" both affect, and are affected by, an organisation and the achievement of its objectives. The theory was developed to solve three main problems... 1. How is value creation and trade possible in fast-changing environments that have little stability? 2. How do we understand the ethics of capitalism, and how can we put capitalism on firmer ethical ground? 3. What should we teach in business schools? Stakeholders are people or parties that are important to you. They are people who can exert influence or power on the success of your project / organization in a certain way, or whom your project / organization may influence. **What is stakeholder management?** Ensuring that everyone is satisfied, well informed and heard. An organization derives influence from sources such as: ⎯ ownership and governance ⎯ economic relationship ⎯ legal/political authority ⎯ public opinion **Categorizing Stakeholders** 1. **Primary stakeholders:** There is interdependence between these stakeholders and the firm: both affect, and are affected by one another, just as the survival of each to some extent depends on the other 2. **Secondary stakeholders:** individuals, groups, entities and species both affect and are affected by the firm's pursuit of its objective A diagram of a diagram Description automatically generated **Competency 4: Ethical and responsible leadership**. Lead with integrity and accountability, considering the broader impacts of decisions. **Responsible Management:** Setting and pursuing ethical goals, influencing activities toward ecologically, socially responsible ways PART 2 Corporate sustainability rests on a changing nature of the relationship between business, nature, and society -- firms are interested in this debate for various reasons (e.g., economic rationale, stakeholder pressure, and ethical considerations). Different society -- business -- government -- environment relationships have underpinned the dynamics of corporate sustainability, illustrated in three key historical stages: industrialisation, the modern corporation and internationalization. Various issues fall under the corporate sustainability umbrella, but it helps to view and categorise issues according to the ESG and also SDG frameworks. **A Changing Context for Business, Nature and Society** Increasing Relevance of **ESG Challanges**: scientific evidence supporting view that environmental challenges (e.g., planetary boundaries), social challenges (e.g., human rights risk), and governance challenges (e.g., corruption risk) are rising globally. **Rising Scope and Scale of Corporate Activities**: firms have grown in size (and power) significantly; in some industries a few firms cover a high volume of production/service; firms have entered into domains formerly controlled by governments (e.g., water, security). **Digitalisation and Datafication**: increased public scrutiny has made ir(reponsible) conduct more transparent; tech firms also contribute to ESG problems (e.g., CO2 emissions). **Globalisation and (the Lack of Global Governance):** firms often escape national regulation due to the international nature of value chains (causing a regulatory vacuum). **CORPORATE SUSTAINABILITY** DEF: Corporate sustainability focuses on managing and balancing an enterprise's embeddedness in interrelated ecological, social and economic systems so that positive impact is created in the form of longterm ecological balance, societal welfare and stakeholder value. Economic, social and environmental issues are part of larger systems, and these systems interact with each other. Corporations, for instance, impact and are impacted by various natural systems, like the Earth's climate system. Corporate sustainability aims at balancing social, environmental and economic interests while doing business. It therefore aims to avoid situations where taking action in support of one sphere comes at the expense of another sphere **HOW HAS CORPORATE SUSTAINABILITY CHANGED?** ISSUES=What issues are addressed by corporate sustainability (e.g., community development, ecological diversity, social inequality, planetary limits MODES= How are modes used to address the issues (e.g., foundations, corporate codes, cause-related marketing, partnerships, regulation)? RATIONALES= Why, or what rationales are offered for addressing these issues and adopting these modes, whether based on principles (e.g., customary ethics), strategies (e.g., the business case), or business dependencies (e.g., environmental conditions), for example? CORPORATE SUSTAINABILITY ISSUES: Corporate sustainability issues are the problems or opportunities to which corporate sustainability is invoked or addressed, usually reflecting societal and governmental agendas. They include underlying **trends** which are beyond single issues or **events** which trigger new sustainability agendas that companies face. SHIFT IN CORPORATE SUSTAINABILITY ISSUES 1\. Changes from corporate welfare policies 2\. Greater concern for the social, economic and environmental impacts of production and commercial processes 3\. Changes in environmental policies 4\. Corporate sustainability issues reflect specific consumer or investor preferences 5\. Corporations are expected to engage their corporate sustainability in relation to core governmental issues 6\. Corporate sustainability has recently attached itself to wider societal agendas CORPORATE SUSTAINABILITY MODES There has been a general historical development of corporate sustainability modes, specifically with the shift from corporate sustainability being organised entirely in and by the corporations themselves to being organised with other actors. Corporate sustainability reflects 'partial' organisation by the corporation in conjunction with other actors whether in business associations, crosssector partnerships or multi-stakeholder initiatives. Whilst corporations open their sustainability policies to outside influences, they also learn to deal with complexity as a result of the confluence of expertise, interest and value that these new organisational approaches bring, and gain legitimacy thereby. **Corporate Sustainability Actors: Society, Business, Government and the Natural Environment** - Society: The core context of corporate sustainability. Societies have expectations of business and certain powers over business, particularly concerning legitimacy. - Business: Gives corporate sustainability substance and shapes corporate sustainability agendas in order to win legitimacy, innovate, attract new customers, motivate employees and make efficiency savings. - Government: The key institutional shaper on behalf of society given their unique authority. Business also looks to governments to ensure functioning markets - Natural Environment: The imperative to include the environment in corporate sustainability analysis became more central in the light of alarming ecological trends (e.g., water scarcity, loss of biodiversity and climate change)