Topics

• The concept of CSR

• Changing expectations in the governance of organisations
• Enlightened shareholder value
• CSR strategies & policies
• CSR competency framework
• Balancing corporate responsibilities
• Sustainability & the triple bottom line
• Communication with stakeholders
- integrated reporting
- the UN Global Reporting Initiative
 EMERGENCE OF CSR

CSR Legislation of Modest Renewed

The first becomes a many of the interest due to
substantial attention to
general CSR issues CSR in the stakeholder
publications concern for that were pressure. CSR
on the role 1980s &
businesses considered in early 1990s becomes a
of business the 1960s strategic issue
& society

1930s 1960s 1980s 1990s 2000-

DEFINING CSR

CSR refers to corporate

behaviour that extent
beyond the economic
motives & legal
requirements

However, CSR is context dependent

DEFINING CSR
Responsibility of an organisation
for the impacts of its decisions &
activities on society & the
environment, through
transparent & ethical behaviour.
(ISO, 2010, p.3).
Responsibility of enterprises for
their impacts on society.
Businesses need to integrate
social, environmental, ethical,
human rights & consumer
concerns into their business
operations & core strategy
(EC, 2011, p.6)
 Different perspectives on CSR
The stakeholder perspective
The ethical perspective

The political The societal

perspective perspective

The philanthropic perspective The strategy-driven perspective

How can compliance with
voluntary codes be achieved?

• Powers of board – corporate governance policies

• Audit, remuneration, nomination, compliance committees -
separation of chairman & CEO
• Disclosure of compliance in annual company report
• Role of corporate compliance / CG committee / corporate
compliance officer
• Role of company secretary
• Corporate policy statement
• Exhortation - government, director bodies, academic bodies
• Pressure from institutional investors
• Stock exchange listing requirements
Social legitimacy of corporate entities
Subsequent developments
• Compliance increasingly mandatory - codes, rules, law
• CSR & sustainability reporting encouraged
• Enterprise risk management became integral part of CG

Early attitudes to corporate governance (voluntary)

• bureaucratic, expensive box-ticking exercise
• the job of business is to create wealth not comply
with principles
What responsibilities does a business have?
To make long-term sustainable profits by
If society wishes to satisfying customers for the benefit of its
limit a company's owners, whilst acting within the law.
single-minded
pursuit of this goal,
for example by
constraining
monopolies,
regulating
employment or
preventing pollution,
it must pass
appropriate laws.
Milton Friedman
 What responsibilities does a business have?
to undertake voluntary
activities & expenditures
which exceed society’s
minimum expectations to honour society’s wider
social norms & expectations
of behaviour over & above
the law

Carroll's corporate social responsibility pyramid

(1979)
Importance of CSR been recognised

King Report (King 1) on corporate governance in South Africa was first to

recognize the interests of corporate stakeholders as well as shareholders.

“That report revolutionised approaches to CG around the world because it said that in
the decision-making process you should take account of the legitimate needs,
interests & expectations of stakeholders linked to the company.

That did not mean that directors should be accountable to stakeholders, but that
they should take account of stakeholder needs & expectations in their decision-
making.”

Mervyn King 2010

Importance of CSR been recognised
Comment on CSR from the British Chancellor of the Exchequer
The Rt. Hon Gordon Brown (2006)

"Today, CSR goes far beyond the old philanthropy of the past -
donating money to good causes at the end of the year - and is
instead an all year round responsibility that companies accept for the
environment around them, to the best working practices, for their
engagement in the local communities & for their recognition that
brand names depend not only on quality, price & uniqueness, but on
how, cumulatively, they interact with the companies workforce,
community & environment.”
Importance of CSR been recognised

“We have to choose between a global market driven only by

calculation of short-term profit, & one which has a human face;
between a world which condemns a quarter of the human race to
starvation & squalor, & one which offers everyone at least a
chance of prosperity, in a healthy environment; between a selfish
free-for-all in which we ignore the fate of the losers, & a future in
which the strong & successful accept their responsibilities,
showing global vision & leadership”
- Kofi Annan, 1999
Secretary-General of the UN
Enlightened shareholder value (ESV)

The satisfaction of the needs of stakeholders is:

– crucial to corporate success
– essential to creating value for shareholders

Profit generated • Shareholder value created • society wealth

increased
Enlightened shareholder value (ESV)

… by meeting & satisfying all stakeholders..

“For many companies, managing CSR well is no longer

seen as an extra cost / burden on hard-pressed
management. Rather, CSR is increasingly viewed, not only
as making good business sense but also contributing to the
long-term prosperity of companies & ultimately its
survival.”
World Business Council for Sustainable Development
Increasing demands for CSR reporting

UK Occupational Pension Funds DEFRA (2001)

– report whether environmental, social & ethical criteria are taken
into account in investment strategy

Australian Stock Exchange

– Listed companies to report performance under environmental
legislation (1998)

UK Companies Act 2006

– UK Operating & Financial Review requires relevant information on
environmental & employee matters
Increasing demands for CSR reporting
UK Companies Act 2006
A director of a company must act in the way he considers, in good faith,
would be most likely to promote the success of the company for the
benefit of its members as a whole & in doing so have regard to:

• the likely consequences of any decision in the long term

• the interests of the company's employees
• the need to foster the company's business relations with suppliers,
customers & others
• the impact of the company's operations on the community & the
environment
• the desirability of the company maintaining a reputation for high
standards of business conduct
• the need to act fairly as between members of the company
Increasing demands for CSR reporting

Singapore Exchange introduce sustainability reporting on a “comply or

explain” basis.

In 2007, Bursa Malaysia implemented rules requiring listed companies

to report their CSR activities.

October 2015, Bursa Malaysia launched a new Sustainability

Framework, comprising amendments to the Listing Requirements &
the issuance of a Sustainability Reporting Guide.
 CSR Strategy & Policies

• To be effective, CSR efforts need to be led by directors &

embedded in corporate strategy.

• CSR policies – how org engage with its shareholders & other
stakeholders.
– influence potential investors
– influence management decisions
CSR Competency Framework
To encourage commitment to CSR practices the British Government created a CSR
competency framework; a flexible tool, which is offered as a "way of thinking" for
companies of all sizes.

The framework has 6 core characteristics with 5 levels of attainment.

3. Questioning 'business as usual'

1. Understanding society 4. Stakeholder relations

2. Building capacity 5. Strategic view 6. Harnessing diversity

 Understanding society:
A knowledge of how the business operates in the broader societal
context & a knowledge of the impact that the business has on
society; plus a recognition that the business is an important player
in society, seeking to make that impact as positive as possible.

CSR Competency Framework

 Building capacity:

Working with others to build

the capability to manage the
business effectively, helping
suppliers & employees to
understand your environment,
& apply social &
environmental concerns.

CSR Competency Framework

 Questioning 'business-
as-usual’:
Constantly questioning your
business in relation to a more
sustainable future & being open to
improving people's quality of life &
the environment, acting as an
advocate engaging with bodies
outside the business who share this
concern for the future.

CSR Competency Framework

 • Recognising that stakeholders include all
Stakeholder those who have an impact on, or are
relations: impacted by, your business.
• Understanding the opportunities & risks
they present & working with them
through consultation, taking their views
into account.
CSR Competency Framework
 Strategic view:
Ensuring that social & environmental concerns are included
in the overall business strategy so that CSR becomes
'business as usual', with leadership coming from the top &
resulting in everyone in the business having an awareness
of the social & environmental impacts.

CSR Competency Framework

 Harnessing diversity:
Recognising that people differ & harnessing this diversity,
reflected in fair & transparent employment practices, promoting
the health, well-being & views of staff with everyone in the
business feeling valued.

CSR Competency Framework

CSR Competency Framework
The 5 levels of Attainment are:

Leadership

Integration

Application

Understanding

Awareness
An organisation's response to the social & environmental impacts recognised through CSR awareness can
provide:
• basic information for the company's CSR report
• cost-effective yet comprehensive ways to manage social & environmental risk
CSR Competency Framework

Increasingly boards include a CSR policy within their CG policies

In addition to the implications for continuing economic success, all company

strategies, polices & management decisions should take account of the
following long-term effects
• The firm's impact on all its stakeholders including:
– customers of the end product / service
– agents, distributors & others in the down-stream supply chain
– original suppliers & others in the up-stream supply chain
– other creditors
– bankers & non-equity sources of finance
– employees including managers
– self-employed contractors to the company
• The firm's impact on all the communities in which it operates (consider
local, regional & national)
• The firm's impact on the environment (consider all the relevant
communities, regions and countries)”
CSR Competency Framework
CSR Competency Framework

EXXON Europe CSR Policy

“We take our responsibilities very seriously - for our employees,

shareholders, customers, communities, the environment and society at
large.”

“We strongly believe that the way we achieve results is as important as the
results themselves. Therefore, we are working hard to embed CSR into the
way we do business”.

“We have integrated CSR policies & practices into our business, which help
us ensure that we meet standards of integrity, safety, health, environment
& social responsibility day in & day out & across our worldwide operations.

We believe that this approach is essential to achieving superior business

results.
CSR Competency Framework

General Motors CSR Key Performance Indicators

Economic indicators
Revenues US$
Net income US$
Earnings per share US$/share
Vehicle sales numbers of vehicles
Product indicators
Fuel economy miles per US gallon
CO2 emissions CO2 per mile by model year
Quality GM and industry % initial quality problems
Environmental indicators
Energy use
CO2 emissions Mil. Metric tons
Waste Mil. Metric tons
Recycling rate %
Water use mil. Cubic litres
Social indicators Donations, Employee diversity, discrimination,
Balancing CSR responsibilities

• A company does not have morals: directors do

• A board has to be the company’s conscience
• Directors need to provide the moral compass

In fulfilling its role the board is responsible for:

- considering the potential effect of the strategies it

formulates
- identifying the likely impact of policies it approves both
short & long term
- recognizing possible outcomes on people - accepting its
duty to be accountable
Balancing CSR responsibilities

• CSR priorities human rights, employee rights, environmental

protection, community involvement & supplier relations
• A coherent CSR strategy, based on integrity, sound values & a
long-term approach, offers clear business benefits
• Companies should articulate their own core values & codes of
conduct, or failing that, to endorse & implement codes
produced by others

• Emphasise the importance of being responsive to local &

cultural differences when implementing global policies

World Business Council for Sustainable Development (1999)

Balancing CSR responsibilities

– Increasingly, companies are reporting in their annual

accounts & on their webpages their CSR policies &
performance on the environment, employee welfare,
ethics & sustainability

• There has been a dramatic increase in CR reporting in Asia

Pacific.
• 71% of companies based in Asia Pacific published CR reports –
increase of 22% since 2011 when less than half (49%) did so.
The KPMG Survey of Corporate Responsibility Reporting 2013
The Benefits of CR / Sustainability Reporting

• Building trust
• Improved processes & system (internal management & decision-
making processes can be examined & improved)
• Progressing vision & strategy (analysis of strengths & weaknesses)
• Reducing compliance costs (meet regulatory requirements
effectively)
• Competitive advantage (attract investment)
Sustainable Development

“Development that meets the needs of the present without compromising

the ability of future generations to meet their own needs”
Brundtland Report UN 1987
Examples of demands for sustainable development

• China's Guangdong Province requiring companies that pollute the ground water
table to clear up / close down.

• The European Union establishing fishing quotas & other fishing limits to sustain
fish stocks.

• South American & European Union controls on forestry products to protect the
rain forest & to ensure that woodland is sustained by replanting.

• Since 1997 attempts to reduce the world's GHGs below 1990 levels by 2012 &
ultimately to reverse the greenhouse effect – Kyoto Protocol.
Integrated reporting non-financial information

• The ICGN believes that reporting of relevant & material non-financial

information is an essential part of the disclosure required to enable
shareholders & investors to make informed investment decisions.
• We use the term ‘non-financial’ to refer to information relevant to
the assessment of economic value, but which does not fit easily into
the traditional accounting framework.
• In a fast-changing, globalising world, information material to investor
decision-making is becoming increasingly diverse & dynamic.
• Long term success in managing a business is increasingly dependent
on factors not reflected in financial statements.
UN Global Reporting Initiative

The 10 principles that businesses should support:

• protection of internationally proclaimed human rights
• make sure that they are not complicit in human rights abuses.
• uphold the freedom of association & the effective recognition of the
right to collective bargaining
• the elimination of all forms of forced & compulsory labour;
• the effective abolition of child labour
• the elimination of discrimination in employment & occupation.
• precautionary approach to env challenges
• greater environmental responsibility
• the development & diffusion of env friendly tech
• work against corruption
UN Global Reporting Initiative

The GRI has been adopted by organisations around the world & now
produce sustainability reports using the GRI framework.

Three types of standard disclosure are included:

• The organisation's profile - information that sets the overall context
including its strategy, profile, & governance.
• The organization's management approach - information that provides
the context for understanding its performance.
• Performance indicators - which provide information on the economic,
environmental, & social performance