Outline. CORP5060 Corporate Social Responsibility John Powell. C: Issues in CSR 1: MNCs and CSR. Reading. Globalization and ethics

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1 CORP5060 Corporate Social Responsibility John Powell C: Issues in CSR 1: MNCs and CSR Outline MNCs and CSR! Donaldson and Dunfee ISCT model! UN Global Compact Principles Issues Supply chains! CSR and Supply chain management! Review for detailed reference list see CORP5060 CSR CORP5060 CSR Reading Blowfield and Murray (2014) chapter 5 Andersen and Skjoett-Larsen (2009) Corporate social responsibility in global supply chains Davis et al (2008) The Responsibility Paradox Donaldson and Dunfee (1999) When ethics travel: the promise and peril of global business ethics United Nations (2013b) Global Corporate Sustainability Report 2013 DNV GL and United Nations Global Compact (2015) Impact: Transforming Business, Changing the World +! Traditional notions of corporate social responsibility say that companies are beholden to the communities in which they are located. But globalization has made it difficult to discern exactly which communities to include. With farflung value chains, decentralized governance, and churning employees, multinational corporations have become what British journalist Martin Wolf calls rootless cosmopolitans. (Davis et al, 2008:32)! Davis et al propose global CSR reflecting very broad scope of perceived responsibilities of MNCs CORP5060 CSR CORP5060 CSR

2 [print]! Well into the 21st century, corporations continue adding more links to their supply chains, stretching ever farther across the globe for cheaper materials and labor. (Davis et al, 2008:33)! Reflects previous decades of offshoring and outsourcing! Results in a blurring of corporations institutional and national boundaries (ibid) and complexity in establishing scope and limits of CR Internationalisation of NGOs to counter MNCs global operations (ibid:36) + growth of partnerships Significance of regulation in driving best practice by firms (ibid:37) especially EU! However, Ghemawat & Altman (2014) suggest some limits to globalization may be emerging! Depth = how much of a country s economic activity takes place across national borders! Breadth = how far, globally, a country s international flows are distributed CORP5060 CSR CORP5060 CSR ! Carroll similarly reflects the issues that globalization raises for CR (2004:114): The explosive growth of MNCs has set the stage for global business ethics to be one of the highest priorities over the coming decades Carroll notes that global stakeholders for a business must incorporate the community of host nations under community, and all the separate sovereign nations that serve as hosts to investing MNCs under government = Substantial increase in complexity of stakeholder relations than for non-mncs! Carroll identifies Donaldson and Dunfee s (1999) Integrative Social Contract Theory (ISCT) as a contingency model of ethical decision-making that might be useful in global applications (Carroll, 2004:115) ISCT (Donaldson and Dunfee,1999) Integrative Social Contract Theory! Note that we will examine cultural variation with respect to CSR strategy (eg Galbreath, 2006) in later weeks! Other work on national culture, such as Hofstede s Value Dimensions, tends to identify the significance of national culture in attitudes and beliefs! Donaldson and Dunfee (1999:51) place this into the context of business ethics: How does a manager navigate these moving, complex currents of international values? They define various levels of authentic global norms that may be held by corporations, industries or economic cultures (ibid:52) see Auchter and Dziewa (2013) for recent application CORP5060 CSR CORP5060 CSR

3 ISCT (Donaldson and Dunfee,1999)! Hypernorms companies must never simply adopt a do in Rome as the Romans do philosophy. They must be alert to the transcultural value implications of their actions. (ibid:59-60) Hypernorms are more than abstractions. The research over the last fifteen years shows that in business ethics we're more alike than we think. (ibid:60) But: may require managerial creativity and flexibility eg Levi-Strauss examples (ibid)! Significance of moral free space in global transactions means firms may find it hard to replicate home approach in the face of cultural conflicts (ibid: 61) = values acceptable to all cultures and all organizations (ibid:52) = norms that are inconsistent with with at least some other legitimate norms existing in other economic cultures (ibid:53) UN Global Compact [print]! Given the idea of hypernorms, we will touch on CR standards and codes of conduct (and later in the context of social accounting and reporting)! The UN Global Compact is perhaps one of the most evident and widely recognised of such codes Launched in July 2000, the UN Global Compact is a leadership platform for the development, implementation and disclosure of sustainable corporate policies and practices. (UN, 2013a) a direct result of of the call of the then UN Secretary- General, Kofi Annan, for business leaders to partner with UN agencies, and for civil society to support universal environmental and social principles (Blowfield and Murray, 2014:120)! Initially driven by UN Millennium Development Goals CORP5060 CSR CORP5060 CSR UN Global Compact = response to (economic) globalization (and neglect of social and environmental protection in the promotion of the economic agenda) (Blowfield and Murray, 2014:120)! Voluntary framework to promote good corporate citizenship (McIntosh et al, 2003:133) a leadership initiative (UN, 2013a) Organizations commit to incorporate the principles into decision-making at the highest level and to engage in partnerships and promote the case for the compact (ibid) Encourage private innovation in a way that regulation has failed to do (Cetindamar and Husoy, 2007:164)! Not a prescriptive nor externally-audited code of conduct; not a regulatory instrument; not meant to be a safe haven for companies (McIntosh et al, 2003:133) UN Global Compact DNV GL and United Nations Global Compact (2015:24-25) CORP5060 CSR CORP5060 CSR

4 UN Global Compact: principles Social Human Rights 1. Businesses should support and respect the protection of internationally proclaimed human rights; and 2. make sure that they are not complicit in human rights abuses. Social Labour 3. Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining; 4. the elimination of all forms of forced and compulsory labour; 5. the effective abolition of child labour; and 6. the elimination of discrimination in respect of employment and occupation. CORP5060 CSR UN Global Compact: principles Environment 7. Businesses should support a precautionary approach to environmental challenges; 8. undertake initiatives to promote greater environmental responsibility; and 9. encourage the development and diffusion of environmentally friendly technologies. Governance Anti-Corruption 10. Businesses should work against corruption in all its forms, including extortion and bribery. CORP5060 CSR UN Global Compact [print] Current membership! DNV GL and United Nations Global Compact (2015:14) report businesses of 8,041 companies, 170 countries all sizes 4,449 civil society signatories (19759 participants) 4950 > SMEs! cf UN web database (Nov 2016) 2556 active DNV GL (2015:168) UN Global Compact: Issues Gap between intention and action! Recognized in UN s own report! gap between policies and performance exists in almost every area. (UN, 2013b:12) say versus do eg Supply chain While a majority of companies have established sustainability expectations for their suppliers, they are not tracking compliance or helping suppliers reach the desired goals (UN, 2013b:18) CORP5060 CSR CORP5060 CSR

5 UN Global Compact: Issues Gap between intention and action! Supply chain: The low rate of implementation indicates that sustainability actions pertaining to the supply chain are challenging and lower on the priority list for most companies. (UN, 2013b:19) Need to recognize changing nature of business relations driven by globalization (and that this changes and challenges CSR) CSR and supply chain management Sourcemap.com CORP5060 CSR CORP5060 CSR CSR and supply chain management! CSR is no longer the individual company s domain; increasingly it encompasses the entire supply chain multinational companies are also held responsible for environmental and labour practices of their global trading partners (Andersen and Skjoett-Larsen, 2009:77)! the most visible element is the employment of corporate codes of conduct (ibid) eg Levi Strauss & Co 1991! Andersen and Skjoett-Larsen identify the UN Global Compact amidst a range of other codes but highlight that: MNCs have struggled to implement codes in global supply chains Codes can t be enforced in same way as legal requirements often a gap between ethical standards expressed and the actual conditions at the suppliers (ibid:78) CORP5060 CSR CSR and supply chain management Ernst and Young (2016:12) The state of sustainable supply chains! Supply chain sustainability is a key focus area for the UN Global Compact, as participants rank supply chain practices as the biggest challenge to improving their sustainability performance. Drivers for building sustainability into supply chains Moving from risk to unlocking strategic opportunity Efficiency and opportunities for innovation Business continuity License to operate Compliance and regulatory risk 54% 22% 87% 33% The state of sustainable supply chains Building responsible and resilient supply chains Ernst and Young (2016:18) % responses by interviewed companies CORP5060 CSR

6 CSR and supply chain management CSR and supply chain management [p] Andersen and Skjoett-Larsen (2009:78-82)! IKEA case study: IWAY Code introduced in 2000 (IKEA joined UN GC in 2004) Progressive levels of social and working conditions suppliers must meet To date, mostly focused on bringing as many suppliers as possible up to level 2 Future task to bring some proportion of suppliers to level 3! IKEA and UN Global Compact IKEA GROUP FY15 SUSTAINABILITY REPORT CORP5060 CSR CORP5060 CSR CSR and supply chain management [p]! Practising CSR in supply chains requires that CSR is embedded within the entire organisation It has to be disseminated to all functional areas, subsidiaries abroad and offshore suppliers (Andersen and Skjoett-Larsen, 2009:82! Such embedding requires: Knowledge enhancing mechanisms knowledge controlling mechanisms firm-specific assets appropriate corporate history or tradition (ibid:81-82)! Compare to ongoing issues with labour rights in electronics manufacturers in China eg Dell, Apple Review! Globalization has substantially changed the business environment over past decades and continues to make for complex CSR considerations Modelling the potential for cultural conflict in social norms may inform the development of global firms CSR responses! Standards and codes, such as the UN Global Compact, may provide some structure and uniformity to MNCs CSR responses but is still limited in adoption! Supply chain considerations are an increasingly significant part of the criticism of MNC operations and where CSR actions may be difficult to implement successfully, regardless of good intent! Next week environment and sustainability CORP5060 CSR CORP5060 CSR