Chapter 6: Corporate Social Responsibility PDF

Chapter 6: Corporate Social Responsibility Sustainable Business Management Introduction - History • The concept of CSR is not new • Even centuries ago, rich business owners were already donating money to charities • The most famous philanthropist is definitely John D. Rockefeller • At the end of...

Chapter 6: Corporate Social Responsibility Sustainable Business Management Introduction - History • The concept of CSR is not new • Even centuries ago, rich business owners were already donating money to charities • The most famous philanthropist is definitely John D. Rockefeller • At the end of the 19th century some companies were trying to create a more sustainable working environment for their employees • In that time shareholders would start law suits against their management because it was seen as wasting money • In the last decades, CSR has become mainstream in many (big) companies as it is the easiest way to comply with the sustainability demands of customers and society • Many companies nowadays have CSR managers and dedicate a part of their website to CSR Sustainable Business Management Introduction - Definition • Creating a definition for CSR is a difficult task • The theory and practical implementation of CSR are often two very different things • CSR has its roots within business ethics, corporate governance and sustainable development • The EU defines CSR as: ‘CSR is the responsibility of enterprises for their impact on society: • Organisations should have processes in place to integrate stakeholders’ concerns into their business operations and strategy. • Organisations should maximise the creation of shared value for both shareholders and stakeholders. • Organisations should identify, prevent and mitigate possible bad impacts.’ Sustainable Business Management Introduction - Definition • The ISO26000 standard defines CSR as: ‘CSR is the responsibility of an organisation for the impacts of its decisions and activities on all stakeholders through transparent and ethical behaviour that: • contributes to sustainable development; • takes into account the expectations of the stakeholders; • is in compliance with applicable law and consistent with international norms of behaviour; • is integrated throughout the organisation and practised in its relationships.’ Sustainable Business Management Introduction - Definition • The EU definition is a combination of stakeholder theory and shared value creation which is quite broad and very far from what companies are implementing today • The ISO26000 defintion is describing the actions that companies could take to avoid doing harm to stakeholders but not the actions that could create value • The correct definition probably lies somewhere in between: Sustainable Business Management Introduction – Advantages of CSR 1. CSR puts a price on externalities • Government can tax companies that do not take their responsibilities so that responsible companies can sell at a lower price • As these companies need to internalise these taxes into their production cost, they will be more inclined to change their process 2. CSR shapes the reputation of a company • Customers and employees want companies to become more sustainable • CSR can help build a reputation and create an identity for consumers and employees to connect with • CSR actions are usually strongly communicated about Sustainable Business Management Introduction – Advantages of CSR 3. CSR attracts investors • Investors are looking for “green investments” • Sustainable KPIs are added to the management goals • Different standards for sustainable investment have been created (see chapter 11) 4. CSR motivates employees • CSR activities will help employees to identify with the company • A lot of CSR activities are targeted at the employees’ well-being • Employees are also given the opportunity to participate in CSR activities 5. CSR empowers stakeholder relations • Most CSR activities are targeted towards the company’s stakeholder and will therefor create stronger relationships and increase communication Sustainable Business Management Dimensions of CSR - Values • Corporate values are not necessarily alligned with personal values • Corporate values need to be adopted throughout the whole company • Practice what you preach: CSR actions should show the importance of these values • Corporate values are culturally defined Sustainable Business Management Dimensions of CSR – Values – Ben & Jerry’s • Ben & Jerry’s has actively been supporting marriage equality for over 35 years. • At the start, the company agreed to donate 7,5% of their pre-tax profits to charity and a 5 to 1 top-tobottom salary ratio was established. • The board of directors of Ben & Jerry’s has seven members of which four are women. “Capitalism and the wealth it produces do not create opportunity for everyone equally. We recognize that the gap between the rich and the poor is wider than at any time since the 1920’s. We strive to create economic opportunities for those who have been denied them and to advance new models of economic justice that are sustainable and replicable.” Sustainable Business Management Dimensions of CSR - Vision • Creation value for all stakeholders instead of only shareholders requires a visionary leader that can explain why the new business model is better than the old one • As mentioned before, true value is created when you deliver the best solution to the customer’s needs (The “why” of the company) Sustainable Business Management Dimensions of CSR – Vision - Tesla • Tesla sees a future with only use of clean, renewable energy • They contribute through business making clean cars and energy accessible for everyone • They contribute to society as well, creating 1000s of jobs in a sustainable sector ‘And this is just the beginning. With Tesla building its most affordable car yet, Tesla continues to make products accessible and affordable to more and more people, ultimately accelerating the advent of clean transport and clean energy production. Electric cars, batteries andrenewable energy generation and storage already exist independently, but when combined, they become even more powerful – that’s the future we want.’ Sustainable Business Management Dimensions of CSR - Work • Happier employees tend to be more productive and will be more loyal to the company • Self-discipline is usually better than a heavily controlled environment: soft skills are more important than ever but need more flexibility as they cannot be turned on and off on command • Humans are only productive half of the work time so slack time should be allowed • Teamwork is more important than ever, so there needs to be room for team building activities • Employees should be able to be themselves at work Sustainable Business Management Dimensions of CSR – Work - Netflix • Netflix allows their staff to work flexible and take days of for quality time with their family • Netflix puts an emphasis on transparency, honest feedback, artistic expression and employee autonomy. ‘To avoid this, we work hard to maintain employee excellence and keep our business as simple as possible given our growth ambitions. We want to be a company of self-disciplined, accountable people who discover and fix issues without being told to do so. Some examples of our unusual amounts of employee freedom: • We share documents internally broadly and systematically, so people can read and often comment on them—including memos on each title’s performance, our strategy decisions and product feature tests. There are some leaks, but the value of highly-informed employees is much greater. • Our policy for travel, entertainment, gifts and other expenses is five words long: “Act in Netflix’s best interest.” • Our vacation policy is: “Take vacation.” We don’t have any rules about how many weeks per year. Frankly, we mix work and personal time quite a bit, doing email at odd hours or taking off a weekday afternoon. Our leaders make sure they set good examples by taking vacations, often coming back with fresh ideas, and encouraging the rest of the team to do the same. • Our parental leave policy is: “Take care of your baby and yourself.” Parents generally follow local norms.” Sustainable Business Management Dimensions of CSR - Governance • Corporate governance is about the power that companies can hold over stakeholders • In corrupt regions with a weak government, big companies often take over the responsibilities of the government • Companies are not democratically chosen • Ethical behaviour is important Sustainable Business Management Dimensions of CSR – Governance - Starbucks • Starbucks sets up partnerships with coffee farmers to share their knowledge and know-how • They want to buy 100% ethically sourced coffee and are helping the community to offer it to them though the C.A.F.E. program ‘Starbucks is dedicated to helping farmers overcome the challenges facing coffee communities. We are committed to buying 100 per cent ethically sourced coffee in partnership with Conservation International. To improve productivity and sustainability, we share our research and resources through our Farmer Support Centres— located in coffee-producing countries around the world. They’re open to farmers regardless of whether they sell to us.’ Sustainable Business Management Dimensions of CSR - Relationships • Many CSR activities are directed towards stakeholder management • Long-lasting relationships with stakeholders are important to ensure good communication and identification of potential risks and opportunities Sustainable Business Management Dimensions of CSR – Relationships – Levi’s • Levi’s did not just ban suppliers who worked with child labor but looked for a solution • In Bangladesh, they paid the schooling of kids and had the supplier already pay the kids when they were in school ‘Under the agreement, the factories agreed to continue to pay the already employed underage workers their salaries and benefits while they attended school and offer them fulltime jobs when they reached the legal working age. LS&CO. agreed to pay for the student’s tuition and books. If there was no room in the nearby public school, LS&CO. and the factories would rent space and hire a teacher for the students.’ Sustainable Business Management Dimensions of CSR - Communication • CSR activities directed towards communication are most used by companies • Companies want to become more transparent about processes and decisions • However, a lot of companies use communication as promotion or to protect their reputation • In some cases, the communication is merely used as window dressing while the processes remain as ‘bad’ as ever. This concept is called “Greenwashing” • Most companies have communication about their CSR activities in their reporting or on their website Sustainable Business Management Dimensions of CSR – Communication – Patagonia • Patagonia wants to inform its customers of the impact of their production and clothes • They encourage customers to reuse and recycle and to buy consciously ‘Nevertheless, Patagonia is a growing business—and we want to be in business a good longtime. The test of our sincerity (or our hypocrisy) will be if everything we sell is useful, multifunctionalwhere possible, long lasting, beautiful but not in thrall to fashion. We’re not yetentirely there. Not every product meets all these criteria. Our Common Threads Initiativewill serve as a framework to advance us toward these goals.’ Sustainable Business Management Dimensions of CSR - Services • Some CSR activities offer additional services to customers which are not part of the regular core business • Often oriented towards waste reduction, product life-span extension,… Sustainable Business Management Dimensions of CSR – Services – H&M • H&M has put recycling boxes in many stores where any clothes can be returned in exchange for a gift certificate • H&M opened a renting service in Stockholm ‘United by our values, we have an ambition to lead the change towards a circular fashion industry with net-zero climate impact, while being a fair and equal company. We will continue to listen to our customers and meet them where they are, while inspiring them to develop a new relationship with fashion.’ Sustainable Business Management Critiques on Corporate Social Responsibility “CSR is only a PR tool” • Governments need to regulate the impact that our economy and businesses have on society, companies only use CSR as a promotion tool • Companies only promote succes stories while processes and practices stay exactly the same (Greenwashing) • Some companies use a rebranding strategy to appear more “Green” • However: • Not all governments are powerful enough to regulate the impact • Some companies might still use CSR for the wrong reasons but priorities are shifting Sustainable Business Management Critiques on Corporate Social Responsibility “The main responsibility of a business is economic” • This has been the main mindset during the age of capitalism • We have seen that a shift towards economic and social value is needed • The comment is based on the believe that the free market will lead to the best possible outcome for all actors • We have already seen that the free market theory has some fundamental flaws • Not all transactions involve money • Externalities are not taken into account • … Sustainable Business Management Critiques on Corporate Social Responsibility “Competition is too fierce to spend money on CSR” • Consumers will not pay more for sustainable products because they don’t know it the others will do it too therefor the choice should not be left to the people • Increased competition has forced companies to go back to their “bottom line” • However: • Standalone CSR activities are probably too expensive for a lot of companies but integrated value creation could lead to both financial and social value Sustainable Business Management Critiques on Corporate Social Responsibility “CSR has gone too far” • CSR is only a business trend and is even laughable in some companies • CSR has been misused by companies for promotional reasons • However: • If practised right, CSR can create social value • A different approach is needed Sustainable Business Management The future of Corporate Social Responsibilty • 5 stages of CSR 1. Defensive CSR • To avoid harm/fines • To create shareholder value • Investments in energy efficiency to lower cost, decrease CO2-emission to avoid fines, start a volunteering program to build a reputation 2. Charitable CSR • To give back to society • Standalone actions that are not attached to the company’s core business • Donations to charity 3. Promotional CSR • Part of the marketing strategy • “Greenwashing” • Use of antibiotics in meat that is labelled “all natural” Sustainable Business Management The future of Corporate Social Responsibilty • 5 stages of CSR 4. Strategic CSR • Part of the strategic decisions of a company • Actions are closely linked to the company’s core business • Publishing extensive reports to show results of the efforts, create new social or environmental policies that involve the whole company 5. Transformative CSR: • New rules and standards for a whole sector • Actions that tackle the root causes of unsustainability Sustainable Business Management Case: JBC (p.194-195) 1. What stage of CSR is JBC in? Are they practising CSR 2.0 already? 2. Which of the dimensions of CSR are mentioned here? 3. Can you find levels of improvement for JBC concerning social responsibility? Sustainable Business Management