Corporate Social Responsibility & Sustainable Development

Transcription

1 Corporate Social Responsibility & Sustainable Development July 18, 2013 Beahrs Environmental Leadership Program

2 Corporate Social Responsibility A Few Defini4ons The idea of social responsibili4es (CSR) supposes that the corpora4on has not only economic and legal obliga4ons, but also certain responsibili4es to society which extend beyond these obliga4ons Social responsibility is the obliga4on of decision makers to take ac4ons which protect and improve the welfare of society as a whole along with their own interests [CSR is] the con4nuing 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 Source: Corporate Social Responsibility: An Ethical Approach

3 Sustainable Development A key component of Corporate Social Responsibility Mee4ng the present without compromising the ability of future genera4ons to meet their own needs Integrate into the core business strategy to capture opportuni4es and create compe44ve advantages

4 Corporate Social Responsible Corpora4ons Roles Not harming the environment Trea4ng employees fairly Ensuring responsible supply chain management Reducing climate change impact Improving educa4on/skills in surrounding communi4es Listening/responding to public concerns Increasing economic stability Helping reduce the rich- poor gap Suppor4ng charity/community projects Solving social problems Suppor4ng progressive government policies

5 Corporate Social Responsibility A Few Ques4ons Are corpora4ons as legal organiza4onal en44es, or is it only those individuals working within those corpora4on capable of being held morally responsible for their ac4vi4es? Aren t firms socially responsible only when they focus on the bo]om line? Isn t it only through a market economy in which firms focus on profits that there have been significant benefits for consumers and ci4zens around the world in terms of be]er quality of life?

6 Corporate Social Responsibility Should Firms Go Beyond Profits? [In a free society] there is one and only one social responsibility of business to use the resources and engage in ac4vi4es designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free compe44on without the decep4on or fraud [The responsibility of a corporate execu4ve] is to conduct the business in accordance with [the owners ] desires, which generally will be to make as much money as possible while conforming to the basic rules of the society, both those embodied in law and those embodied in ethical custom. M. Friedman

7 Corporate Social Responsibility Should Firms Go Beyond Profits? Firms have an obliga4on to respect ethical values or principles even when by doing so their profit margin is nega4vely affected Philanthropy and charity ac4vi4es Community development Disaster relief efforts

8 Corporate Social Responsibility A Few Challenges Aligning value between business and stakeholders Business focuses on delivery of value Stakeholders not only appreciates value delivered by business, but are also concerned with the process that business uses to deliver its products or services Private profits versus public good Business views CSR as a cost element Stakeholders expect business to be socially responsible but may not be willing to pay for the cost incurred Compe4ng (or conflic4ng) stakeholder expecta4ons Stakeholders distrust of business intent Compliance mentality

9 Corporate Social Responsibility A Business Impera4ve Poten4al partner wants to work with sustainable companies Employees want to work for sustainable companies Stakeholder engagement not only generates good will, but good solu4ons to tough problems

10 How Sustainability Affects Value CreaCon PotenCal impacts of Sustainability Efforts A stronger brand and greater pricing power Greater opera4onal efficiencies More efficient use of resources Supply chain op4miza4on Enhance ability to retain talents Greater employee produc4vity Improve customer loyalty Enhance ability to enter new market More poten4al sources of revenue Lower market, balance sheet and opera4onal risks Lower cost of capital Greater access to capital, financing and insurance Lower costs/taxes Value CreaCon Levers Pricing Power Cost Savings Employee Recruitment/ Engagement Market Share New Market Entry Risk Premiums Cost of Capital Margins Improvement Revenue Growth Profits Free Cash Flow Value MulCple Source: Sustainability and Compe44ve Advantage Total Shareholder Return

11 The Community and The CorporaCon New QuesCons Regarding Strategy FormulaCon Process Organiza4onal Competencies (What can we do?) What capabili4es are we commi]ed to developing and to learning to care about? Value of Key Implementers (What do we want to do?) Strategy Industry Threats and Opportuni4es (What might we do?) How can we shape tomorrow s value system to create new possibili4es in partnership with stakeholders? Societal Responsibili4es (What ought we do?)

12 Building A Strong CSR Strategy Core Ideology: The glue that holds the company together through 4me Core Purpose: The reason for exis4ng Core Values: A small set of 4meless guiding principles that help navigate the company in any endeavor Within the company s core ideology, a firm must ensure that corporate ci4zenship is a component of the glue that binds the company together

13 Building A Strong CSR Strategy Products and Services: The values a company a]empts to create to sa4sfy stakeholders needs Recognize markets for socially responsible products and services and use corporate ci4zenship as a differen4ator. Realize the benefits of global corporate ci4zenship as a strategic lens to iden4fy market risks and opportuni4es with products and services.

14 Building A Strong CSR Strategy Business Process: The approach a business en4ty employs to create value for its stakeholders Ac4vely monitor changing business process expecta4ons and ac4vely demonstrate commitment to responsible business prac4ces with collabora4ons that produce voluntary standards which extends well beyond legal requirements

15 Building A Strong CSR Strategy Societal Engagement: The way in which a firm interacts with its stakeholders Go beyond corporate philanthropy and other benevolent acts. Cral societal engagement programs that align significant social issues with the core competency of the business en4ty. Establish public/private partnerships to address significant social challenges in areas where the business impacts society.

16 Sustainability Strategy Prerequisites for Genera4ng Significant Value Leadership to demonstrate commitment to a new way of doing business that ul4mately affects all key processes Strategic management framework must incorporate the social and environmental objec4ves as contributors to, and driver of, financial performance not detractors

17 Sustainable Development The Challenge Addi4onal costs with li]le immediate benefits Risk management mentality Private Profit vs. Public Good Public embrace it but don t want to pay for it Required disrup4ve technology may be risky and controversial Different standards in different parts of the world

18 Sustainable Development The Mindset Move beyond whether or not it pays to be green to when is it possible to do so? Establish environmental policy based on economic fundamentals of business Industry structure Firm s posi4on in the industry Organiza4onal capabili4es Investment in sustainable prac4ces to gain compe44ve advantage

19 CompeCCve Environmental Strategies Iden4fying Sources of Compe44ve Advantages PosiConing Michael Porter Compe44ve advantages are generated either by: Low Cost: Efficient use of resources Product Differen4a4on: Create unique value, features, performance, etc.

20 CompeCCve Environmental Strategies Iden4fying Sources of Compe44ve Advantages Resource- Based View Not seen as a func4on of the industry, but the ability of firms to use available resources Technical capabili4es Ownership of Intellectual Proper4es Brand Financial capabili4es, etc

21 CompeCCve Environmental Strategies Eco- Efficiency Increase profits by inden4fying concealed opportuni4es for innova4ons Use of eco- design and eco- efficiency measures to enhance resource produc4vity Move beyond single firm by teaming with business partners (extended enterprise concept)

22 CompeCCve Environmental Strategies Beyond Compliance Leadership More than efficiency improvement, customer and general public acknowledgement Must con4nue to move forward to maintain leadership Might exert indirect influence on corporate image or even change consumer shopping behavior Voluntarily set standards of excellence beyond that of environmental compliance

23 CompeCCve Environmental Strategies Eco- Branding Marke4ng differen4a4on based on environmental a]ributes Higher perceived value, not lower price Three pre- requisites: Consumers willingness to pay Reliable informa4on Barrier to imita4on

24 CompeCCve Environmental Strategies Environmental Cost Leadership Be compe44ve on price and environmental performance Radical product innova4on rather than incremental process innova4on Material subs4tu4on Reduc4on in use of material, etc

25 Sustainability Strategy The Process Kaplan- Norton ExecuCon Premium Lubin- Esty Sustainability Model Stage 1: Develop the Strategy 1. Envision a New Future Stage 2: Translate the Strategy Stage 3: Align the Organiza4on Stage 4: Plan Opera4ons 2. Build the Analy4c Framework 3. Co- Create the Sustainability Strategy 4. Implement the Sustainability Plan Stage 5: Monitor and Learn 5. Evaluate Sustainability Performance Stage 6: Test and Adapt 6. Re- Envision Sustainability

26 Corporate Social Responsibility Some Tools Full, transparent and 4mely repor4ng of progress beyond financial performance Triple Bo]om Line (TBL): Economic Performance Indicators Environment Performance Indicators Social Performance Indicators Balance Scorecard (BSC) A strategic planning and execu4on tools that 4es company vision and strategy to four performance perspec4ves

27 Corporate Social Responsibility Tracking Progress - Balanced Scorecard Financial Return on sales Cash flow Capital Expenditures Vision & Strategy Internal Process Environmental Health Safety Sustainable sourcing Energy usage Waste disposal Customer Focus Value crea4on Social & Economic responsibility Learning & Growth Employee development Environmental improvement New products/services

28 Corporate Social Responsibility Tracking Progress - Balanced Scorecard Environmental Social Environmental Social $ Capital investments Disposal costs Revenues from Green products Recycling revenues # Green products Customer returns Unfavorable press coverage Financial Customer Philanthropic contribu4ons $ workers compensa4on costs Legal ac4ons/ costs # of community mee4ngs Customer percep4ons # recalls # of accidents and spills Internal audit scores Energy consump4on # of Employees trained % renewable resource use Internal Process Learning & Growth Average workweek hours $ Minority purchases # Safety improvement projects Workface diversity Community educa4on programs

29 REFERENCE and NOTES Reinhardt, F.L., Environmental Product Differen4a4on: Implica4ons for Corporate Strategy., California Management Review, Summer 1998, Vol. 40, No. 4 Reinhardt, F.L., Bringing the Environment Down to Earth., Harvard Business Review, July- August 1999 Orsato, R.J., Compe44ve Environmental Strategies: When Does It Pay to be Green?, California Management Review, Winter 2006, Vol. 48. No. 2 Nidumolu, R., Prahalad, C.K., and Rangaswami, M.R., Why Sustainability Is Now the Key Driver of Innova4on., Harvard Business Review, September 2009 Lubin, D., Longsworth, A., and Russell, R., Sustainability Strategy Transforms the Enterprise., Balanced Scorecard Report, November- December 2011, Vol. 13, No. 6 Schwartz, M.S., Corporate Social Responsibility: An Ethical Approach., Broadview Press, ISBN: Cri]enden, V.L., Cri]enden, W.F., Pinney, C.C., and Pi], L.F., Implemen4ng Global Corpora4on Ci4zenship: An Integrated Business Framework., Business Horizons, 2011, 54, Collins, J.C. and Porras, J.I., Building Your Company s Vision., Harvard Business Review, September- October, 1996 Epstein, M.J., and Wisner, P.S., Good Neighbors: Implemen4ng Social and Environmental Strategies with the BSC., Harvard Management Communica=on Le?er Valente, M., and Crane. A., Public Responsibility and Private Enterprise in Developing Countries., California Management Review, Spring 2010, Vol. 52, No. 3