How to measure CSR? The Global Compact and the Global Reporting Initiative an exploration of country and industry differences in membership.

Transcription

1 + How to measure CSR? The Global Compact and the Global Reporting Initiative an exploration of country and industry differences in membership. Petra Bouvain (University of Canberra) Stephen Chen (Macquarie University)

2 + CSR Reporting is increasing- different assessments Requirements differ: Global Compact ( 10 principles) Voluntary membership Low fees Non reporters may be expelled GRI Strict reporting guidelines Different levels of involvement Grading

3 + Other sustainability report/ranking organisations FTSE4Good Reporting against new revised criteria each year Questionnaire Dow Jones Sustainability Ranked by sector top 10% of most sustainable companies in

4 + Multiple memberships rare Mining companies Early joiners license to operate Example: BHP Member Global compact GRI Dow Jones Sustainability FTSE4Good Withdrew in 2001 from Ok Tedi ( now LIHIR Gold) Lihir is member of Global Compact but not in other indices

5 + UN Global Compact Launched in 2000 by the UN As policy platform And as a way to promote and share best practice 10 principles guide behaviour Criticism : no enforcement and the quality of the reporting has not been verified

6 + Global Compact 10 Principles HUMAN RIGHTS Businesses should support and respect the protection of internationally proclaimed human rights; and make sure that they are not complicit in human rights abuses. LABOUR Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining; the elimination of all forms of forced and compulsory labour; the effective abolition of child labour; And the elimination of discrimination in respect of employment and occupation. ENVIRONMENT Businesses are asked to support a precautionary approach to environmental challenges; undertake initiatives to promote greater environmental responsibility; and encourage the development and diffusion of environmentally friendly technologies. ANTI CORRUPTION Businesses should work against corruption in all its forms, including extortion and bribery. Global Compact Office, October

7 + Global Compact- Operation Based on corporate commitment Governance Voluntary reporting against principle- no enforcement but non reporters maybe expelled Partnership and networking among members- 80 local networks Problem: SME are joining, large companies are reluctant Low fees for membership ( $ for companies over $ 1 billion turnover, $ 500 for less than $ 250 Million turnover

8 + Participation Corporate Commitment Integrate into Business strategy governance Annual report CSR reporting Problem of Disclosure: Transparency drawbacks Regulatory barriers Cost of collecting information Vergauwen And Alem 2005 Partnerships Global compact.org

9 + Membership 7700 members f which are business From 130 countries BUT Uneven Participation

10 + High percentage of membership High membership Spain France Low membership US Brazil China

11 + Industry sectors in GRI (over 10) Financial services late joiners Mining- early adopters Tobacco- 26 Signalling? To whom? GRI industry count members Financial services 86 Food and beverage products 48 Energy utilities 47 Energy 44 Telecommunications 37 Mining 34 Technology hardware 34 Automotive 33 Retailers 30 Chemicals 29 Forest and Paper products 27 Construction materials 26 Equipment 26 Health care products 26 Tobacco 26 Consumer durables 20 Water utilities 20 Construction 18 Other 18 Household & personal products 16 Commercial services 15 Metals products 15 Aviation 14 Public Agency 13 Logistics 11 Textiles and apparel 11

12 + Reasons for low US membership Fear of litigation ( Ziegler 2007) Different view of Economic contribution Legal risks Philantropic engagement Negative effect for US companies joining the Compact (Janney, Dess and Forlani 2009). Europe Extensive welfare system Higher taxation

13 + World value survey

14 + Reporters US vs Spain US : 131 Companies Spain : 141 Companies Reasons: Large number of Spanish companies have introduced ethical business policies ( Argandona 1999). Interest in FTSE4Good and Dow Jones Sustainability strong in Spain Fundacion Entorno- (PWC and ISE Business school) forum of CEOs and Code of Governance for sustainable businesses ( Mele 2004).

15 + China vs Germany 46 companies reported according to GC standards 45 German companies Reason: Globalization factor Gain legitimacy Better access to overseas markets Signaling behaviour Increase reputation ( Rao 1994). Chinese consumers are supportive (Ramasany and Yeung 2009)

16 + Criticism of Global Compact No enforcement of quality- only expelled for non-reporting No verification Different approaches Small number of companies that have joined GRI and Global Compact Large number of SMEs, US 252 members but 163 are SMEs and only 89 companies

17 + SMEs and Global Compact

18 + Mimetic behaviour? Institutional research has also argued that organizations are more likely to imitate the behaviour of similar organizations (Zucker, 1987). Many of the studies focus on particular industry sectors examples include studies about the automotive industry (Garcia Pont and Nohria 2002) and the choice of entry mode ( Lu 2002), studies have also shown that smaller firms tend to follow the behaviour of larger rivals (Gilbert and Liebermann 1987).

19 + Is the global compact global? Level of involvement differs Many SMEs involved, some very small, Measure of success is not number of participants but quality of participants Need to encourage the largest companies to join Mimetic behaviour

20 + What may change? Impact of WEB 2.0- NEWS no longer controlled by companies through PR. What is news? Blogging, YOUTube, Facebook Who watches? Who cares?

21 + References References Argandona, A. (1999) Business Ethics in Spain: Journal of Business Ethics 22: Fontrodona J. and Mele D, (2003) Ethical Practices in Large Spanish Corporations: Current Status and Perspectives. 2 nd Colloquium for the European Academy of business in Society EABIS hosted by the Copenhagen Business School, Denmark Sept Global Compact, Global Reporting Inititiative, Gonzalez, M. and Martinez, C. (2004) Fostering Corporate Social Responsibility through Public Initiative: From the EU to the Spanish Case, Journal of Business Ethics, 55(3), p Janney. J.J., Dess, G. Forlani, V. (2009 )Glass Houses? Market Reactions t of Firms Joining the the UN Global Compact. Journal of Business Ethics Published online 20 March Katz, J., Swanson, D., Nelson, L.K. (2001), Culture-based expectations of corporate citizenship: a propositional framework and comparison of four countries, The International Journal of Organizational Analysis, Vol. 9 No.2, pp Maignan, I. (2001), Consumers' perceptions of corporate social responsibilities: a cross-cultural comparison, Journal of Business Ethics, Vol. 30 No.1, pp Matten and Moon (2008) Implicit and explicit CSR : A conceptual framework for a comparative understanding of Corporate social responsibility. Academy of Management Review; Apr2008, Vol. 33 Issue 2, p Mele, Dominic, (2004) Corporate Social Responsibility in Spain: An Overview: Working Paper Wp No 543, March 2004 ISE Business School University of Navarra) Accessed 15/5 2010

22 + Ramasamy, B., and Yeung, M. (2009) Chinese Consumers; Perception of Corporate Social Responsibility (CSR). Journal of Business Ethics, vol 88 (1) p Rao, H. (1994) The social construction of reputation: Certification contests, legitimation, and the survival of organizations in the American automobile industry: Strategic Management Journal, 15: Vergauwen, P.G.M.C. and F.C.J. Alem,Annual Report CI disclosures in the Netherlands, France and Germany. Journal of Intellctual Capital, Vol 6, No , p Williams, G,A. and Zinkin, J.2006)The Effect of Culture on Consumers' Willingness to Punish Irresponsible/Corporate Behaviour: Applying Hofstede's Typology to the Punishment Aspect of Corporate Social Responsibility (April 2006). SSRN: World Values Survey ( ) Official v , World Values Survey Association ( Aggregate File Producer: ASEP/JDS, Madrid. Ziegler, Olivier (2007)Global compact membership in Europe and the US: a study of the automobile industry (Case study ). The Journal of Corporate Citizenship June 22, 2007.