The role of stakeholders and the

increasing demands for Corporate

Social Responsibility

Vani Kaushal 2010

 Corporate Social Responsibility (CSR)

Preliminary definitions of CSR

• The impact of a company’s actions on

society

• Requires a manager to consider his acts

in terms of a whole social system, and
holds him responsible for the effects of
his acts anywhere in that system
 Definitions and Relationships
• Corporate social responsibility (CSR) is the process
by which businesses negotiate their role in society
• In the business world, ethics is the study of morally
appropriate behaviors and decisions, examining what
"should be done”
• Although the two are linked in most firms, CSR
activities are no guarantee of ethical behavior for
instance, Companies can engage in CSR activities
even while they are acting in unethical ways.
• For example, Enron was a champion of community
involvement, but used off-balance-sheet partnerships
to bilk investors and eventually ruin the company.
 4

Definitions
• “Achieving commercial success in ways that honor ethical values and
respect people, communities and the natural environment.” Business for
Social Responsibility

• Triple Bottom Line

Economic, Social, and Environmental responsibility
“Quadruple” bottom line - some advocates add “Cultural”

• Used interchangeably with 88% of opinion leaders

Corporate Social Responsibility believe corporations
Corporate Responsibility have a duty to
Corporate Citizenship” stakeholders beyond
profits. Edelman 2002
• Doesn’t make a difference! Survey
 Structure
• What is Corporate Responsibility?

• Current Pressures

• Value and Corporate Responsibility

• The approach at Leading Companies

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Recent Evidence of CSR Interest
• An Internet search turns up 15,000 plus
response to “corporate citizenship”
• Journals increasingly “rate” businesses (and
NGOs) on socially responsive criteria:
▫ Best place to work
▫ Most admired
▫ Best (and worst) corporate reputation
 Reasons for CSR Activities
• CSR activities are important to and even expected
by the public
▫ And they are easily monitored worldwide
• CSR activities help organizations hire and retain the
people they want
• CSR activities contributes to business performance
Corporate Social Responsibility (CSR)
Carroll’s Four Part Definition
• CSR encompasses the economic, legal, ethical
and discretionary (philanthropic) expectations
that society has of organizations at a given point
in time
 Corporate Social Responsibility (CSR)
Carroll’s Four Part Definition
Understanding the Four Components
Responsibility Societal Examples
Expectation

Economic Required Be profitable. Maximize

sales, minimize costs, etc.
Legal Required Obey laws and regulations.
Ethical Expected Do what is right, fair and
just.
Discretionary Desired/ Be a good corporate citizen.
Expected
 Four-Part model of Corporate Social Responsibility
Type of Responsibility Societal Expectation Examples
Corporate contributions.
DESIRED of Programs supporting community/education.
Philanthropic
business by Community involvement/improvement; volunteerism
society
Avoid questionable practices.
EXPECTED of Respond to “spirit” of laws.
Ethical business by Assume law is a floor behaviour; operate above
minimum required by law.
society
Assert ethical leadership.

Obey all laws; adhere to regulations.

REQUIRED of Environmental laws.
Legal Consumer laws.
business by
society Laws affecting all employees. Obey Foreign Corrupt
Practices Act. Fulfil all contractual obligations.

Economic
Source: Carroll (1979))
REQUIRED of Be profitable.
business by Maximise sales revenue.
society Minimize costs (administrative, production, marketing)
Make wise strategic decisions.
Be attentive to dividend policy
Philanthropic Responsibilities
Be a good corporate citizen.
Ethical Responsibilities
Be ethical.
Legal Responsibilities
Obey the law.
Economic Responsibilities
Be profitable.
Pyramid of CSR
 Corporate Social Responsibility
Do more than Integrate
required; e.g. social
engage in objectives
philanthropic and
Fight social giving business
responsibility goals
initiatives
Maximize
firm’s
profits to the Balance
exclusion of profits and
all else social
objectives

Do what it
takes to Comply; do
make a what is legally Articulate
profit; skirt required Lead the
social value
the law; fly industry and
objectives
below other businesses
social radar with best
practices
 Spectrum of CSR

Poor CSR Good CSR

• No employment
• No concern for indirect effect
(land, water, air)
• Destruction of agricultural land
• Not willing to listen to other
stakeholders
• Appropriate of land not being
compensated
• Non compliance of rule of land
• Taking care of workers
• Low dependence on non
renewable resources
• High awareness about CSR
initiatives
• Land compensation
• Increased monitoring system
• Environment responsibility
 What is corporate social responsibility?
The traditional model
Philanthropy in response to
appeals for help from society and
social investment in projects of
Social responsibility long-term importance to the
company

The benefits of business This is the core activity of

• Investment the company providing the
• Jobs created goods and services society
Business • Taxes paid wants
• Goods & Services
• Technology transfer
• Import substitution
• Export earnings
• Development of suppliers
• Human Resources Development
 What is corporate responsibility?
The triple bottom line
Environment

Economic

Social
Social and Financial Performance
A Multiple Bottom-Line Perspective
World-wide critical events
and issues
• 1984 Union Carbide in Bhopal, India - environment
• 1995 Shell in North Sea (Brent Spar) - environment
• 1995 Shell in Nigeria (Ogoni) - distribution of resources
• 1996 BP in Colombia - security forces & complicity
• 2000 Mars, Cadbury, Hershey, Ivory Coast - child labour
• 2000 Chiquita, Del Monte etc., C. America - association
• 2000 Adidas in Pakistan - child labour
• 2002 Talisman in Sudan - complicity in repression
• 2000s Nokia, Motorola, Congolese Coltan - forced labour
• 2010 BP, Gulf of Mexico-Oil Spill
 The Global Compact
•Human Rights
▫Human Rights within sphere of influence
▫Complicity with rights violations - repression & conflict

•Labour
▫The right to collective bargaining & freedom of association
▫Eliminate forced and compulsory labour
▫To effectively abolish child labour
▫To end discrimination in the workplace

•Environment
▫To support a precautionary approach to the environment
▫Promote greater environmental responsibility
▫Encourage the diffusion of environmentally friendly technology

•Anti- Corruption
▫Work against all forms of corruption, including extortion and bribery
 Who are the Stakeholders?
Anyone who affects or is affected by an organisation
Freeman

• Primary stakeholders - those without whom org

cannot survive
▫ shareholders, customers, employees
• Secondary
▫ community, environment, opinion formers
Clarkson
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Who’s Involved?
• Responsibility to all Stakeholders
Shareholders, Investment Banks, Analysts
Board of Directors, C-Suite, Employees
Customers
Environment
Suppliers & Partners
Community
Non-governmental organizations (NGO’s)
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What Are the Big Issues?

• Climate change
• Poverty
• Water
• HIV/AIDs et al (malaria)
• Labor Practices
• Community “License to Operate”
• Transparency
• Good Governance
• Values-Driven Decision Making
• Ethical Marketing Practices
 Integrate CSR Globally
• Incorporate values to make it part of an
articulated belief system

• Act worldwide on those values

▫ Cause-related marketing
▫ Cause-based cross sector partnerships

• Engage with stakeholders

▫ Primary stakeholders
▫ Secondary stakeholders
 Business Ethics Development
• The cultural context influences organizational ethics
• Top managers also influence ethics
• The combined influence of culture and top management
influence organizational ethics and ethical behaviors
• If national practice is bribery, then most companies in
that nation will use bribery.
• If a top manager is unethical, then he/she sets a lead
that others follow.
• When managers behave unethically, employees can be
demoralized, lose faith in the organization, and even
leave their jobs. Others might follow-the-leader
themselves and engage in unethical behaviors.
 Ways Companies Integrate Ethics
• Top management commitment in word
• Company codes of ethics
• Supply chain codes
• Develop, monitor, enforce ethical behavior
• Some ways to do it are:-
▫ fundamental honesty and adherence to the law.
▫ product safety and quality, workplace health and safety precautions
▫ employment practices
▫ Fair practices in selling and marketing products or services
▫ financial reporting
▫ supplier relationships
▫ Pricing, billing, and contracting
▫ Trading in securities and/or use of insider information
▫ security and political activities
▫ environmental protection
▫ intellectual property or use of proprietary information (Business
Roundtable, 1988).
 Corporate Social Responsibility (CSR)
Arguments Against

• Restricts the free market goal of

profit maximization
• Business is not equipped to
handle social activities
• Dilutes the primary aim of
business
• Limits the ability to compete in
a global marketplace
 Corporate Social Responsibility (CSR)
Arguments For
• Addresses social issues
and allows business to be
part of the solution
• Protects business self-
interest
• Limits future government
intervention
• Addresses issues by using
business resources and
expertise
• Addresses issues by being
proactive
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CSR and Shareholder Activism

Number of shareholder resolutions filed
in 2006 demanding CSR reports: 22

Number in 2007: 38

General Electric – First company to dedicate IR staff

to solely address non-
financial issues.
Who Publishes
CSR Reports?
 29

Just a Few You may Have Heard of…

 30

Driven by Expectations
• Soaring expectations mean that compliance
is no longer enough
▫ Compliance only gets you onto the playing field
▫ Meeting high expectations for:
 Mitigating harm
 Creating positive change

• Nike
▫ “Yes, we do hold you responsible”

• Sustainability means forever

▫ Meeting the needs of the present without
compromising the future
 31

The Business Case for CSR

• Efficiencies - Reduction in Operating Costs
• Financial Performance Improved
 KLD Domini 400 Social Index – Applies exclusionary screens to the S&P
500. The index has outperformed the S&P 500 on a total return basis and
on a risk-adjusted basis since its inception in May 1990.

• Access to Capital - through SRI and Institutional Investors

• Attract & Retain Top Talent
 87% of Americans felt that their job loyalty would increase if their
company supported activities that improved society. Cone/Roper Report 1999
 A company’s commitment to social issues is important when consumers
decide where to work (77%) Cone Study, 2002
 32

The Business Case for CSR (cont.)

• Enhanced Brand Image and Reputation
▫ 75% of [consumers] would give a CSR company the “benefit of the doubt”
if they were subject of negative publicity. 2002 Edelman Survey
▫ In 2002, Americans are 30% more likely to switch from one brand to
another if that brand is associated with a good cause. Cone's
2002 Corporate Citizenship Study

• Increased Customer Loyalty

▫ If price and quality were equal, 76% of Americans would switch to a
brand, product, or service from a company committed to CSR. 2002
Edelman Survey

▫ One in five consumers will pay more for a product labeled as social,
ethical or environmental. Cone/Roper Study, 2000

• Reduced Regulatory Oversight/Positive Public Policy

• Stakeholder Activism
Presentation to be followed by a case study.