CSR Presentation on:

“The Path to Corporate Responsibility”

Presented By: Group 4 | Section C

Amitabh Gautam (13P123)

Asmita Sinha (13P133)
Shreyas Desai (13P138)
Pranjal Goel (13P156)
Armaan Sarkar (13P174)
Devasheesh Mathur (13FRM91)
 Executive Summary
• CSR is not an overnight activity but a tangible and continued learning process
• 2 types of learning: a) Organizational Learning b) Societal Learning
• There are 5 stages of Organizational Learning
- Defensive Stage
- Compliant Stage
- Managerial Stage
- Strategic Stage
- Civil Stage
• Societal learning characterized by 4 stages of issue maturity
- Latent
- Emerging
- Consolidating
- Institutionalized
• The Civil Learning Tool tells us that we need to move towards the higher
opportunity green zone while avoiding the risky red zone
• Nike, the leader in the apparel industry showed us how to apply the stages of
organizational learning to help grow their business in the long-term
CSR: Overnight Activity or Continued Learning?
The CSR Learning Curve

Implication for the present

“Companies don’t become model citizens overnight. Nike’s metamorphosis from
the poster child for irresponsibility to a leader in progressive practices reveals
the five stages of organizational growth”
The 5 stages of Organizational Learning
Summary
Stage What Organizations Do
DEFENSIVE Deny practices, outcomes or
responsibilities
COMPLIANCE Adopt a policy based
compliance approach as a cost
of doing business
MANAGERIAL Embed the societal issue in
their core management
processes
STRATEGIC Integrate the societal issue into
their core business strategies
CIVIL Promote broad industry
participation in corporate
responsibility
Why they do it
To defend attacks to their
reputation which may cause
short term damage
To mitigate erosion of
economic value in the medium
term
To achieve longer term gains
by integrating responsible
business practices into daily
operations
To enhance economic value in
longer term and to gain first
mover advantage by aligning
strategy with societal issues
To enhance economic value by
overcoming first-mover
disadvantages through
collective action
 The Defensive Stage
“It’s not our job to fix that”

Characteristics
• Company faced with unexpected
criticism by media and civil activists
• Sometimes from direct stakeholders
such as employees, customers and
investors
Responses
• Responses designed and
implemented by legal and
communications teams
• Tend to involve either outright
rejections of allegations or denial of
any links

Example: Royal Dutch Shell’s handling of carbon emission controversy

• Royal Dutch Shell denied its responsibility for emissions created by its energy
products for years
• This was the characteristic of most companies in the energy sector
• Company continues to resist environmentalists’ demands for accepting some
responsibility for emissions from its products
 The Compliance Stage
“We’ll do just as much as we have to”

Characteristics
• Corporate policy must be established
and observed
• Usually done in ways such that it can
be made visible to the critics of the
company
Implications
• Creates value by protecting the
company’s reputation and reducing
the risk of litigation
• Aim is to just be compliant while
stakeholders need a far greater
commitment from the company

Example: Nestle and the other food companies

• Activists blamed Nestle for its infant food formula as mother’s in developing
countries would end up mixing powder with contaminated water
• Nestle’s response for many years was to shift its marketing policies to make this
hazard known to new mothers
• Instead, they could have educated them generally about ways to ensure their
babies’ overall nutrition
 The Managerial Stage
“It’s the business, stupid”

Characteristics
• Realization by company that it’s
facing a long term problem
• Cannot be swatted away with
attempts at compliance or a public
relations strategy
Solutions
• Need to empower managers more
• Managers need to be identified
according to their core business
responsibilities and solutions given
to them

Example: Nike and the apparel industry

• Nike and the other players in the apparel and footwear industry were faced with
charges of bad labour standards
• They understood that they needed to change for being compliant in agreed-
upon standards in global supply chains
• Needed to change procurement incentives, forecasting sales methods and
inventory management methods
 The Strategic Stage
“It gives us a competitive edge”

Characteristics Implications
• Realization that to go ahead in the • Need to address and promote
industry, radical changes are required responsible business practices

• Rather than setting targets, entire • Can give the company a leg up on the
strategies need to be realigned competition and contribute to it’s
towards CSR long-term success

Example: The Automobile Industry, The Food Industry

• Automobile companies know that their future depends on their ability to
develop environmentally safer forms of mobility
• Food companies struggling to develop a different consciousness about how
products after their consumers’ health
• Pharma companies exploring how to integrate health maintenance into their
business models while treating illnesses
 The Civil Stage
“We need to make sure everybody does it”

Characteristics Implications
• Companies promote collective action • Promotes an overall attitude towards
to address society’s concerns CSR in the industry

• Sometimes could be linked directly • Can even guard against any

to their strategy and helping create a allegations by being the first mover in
good name among stakeholders not that respect
just for the present but the future

Example: Alcohol Companies, Energy Companies

• Diageo and other alcohol companies promote responsible drinking to drive the
whole sector towards such practices so that restrictive legislation doesn’t cause
their downfall
• Energy companies supporting the UK’s Extractive Industries Transparency
Initiative, which urges governments to report their aggregate revenues they
derive from resource extraction
 Societal Learning
The Four Stages of Issue Maturity
Pharma company Novo Nordisk created a scale to measure the maturity of societal
issues and public’s expectations around those issues. Can be used by companies
facing societal issues
Stage Characteristics
Latent • Activists aware of the societal issue
• Weak scientific or other hard evidence
• Issue largely ignored by business community

Emerging • Political and media awareness of societal issue

• Emerging body of research, but data still weak
• Businesses experiment with approaches to deal with issues

Consolidating • Emerging body of business practices present around issue

• Sectorwide and issue-based voluntary initiatives established
• Increasing view of need for legislation
• Voluntary standards are developed, collective action occurs
Institutionalized • Legislation or business norms are established
• Embedded practices become a normal part of a business- excellence
model
 Examples of Societal Learning

• Companies need to be able to predict and credibly respond to society’s

changing awareness of particular issues

• For eg: The belief that pharma companies should sell life saving drugs to
the poor at reduced prices, since the company can afford to do so

• Once leading companies adopt certain commitments, laggards must

follow suit or risk consequences
- Levi Strauss publicly launched its “terms of engagement” in 1991 which
defined labour standards for Levi’s business partners
- Body Shop adopted human rights policies in the mid 1990s, making most
companies deeming its practices unfeasible
 The Civil Learning Tool (1/2)
• Intended to help companies see where they and their competitors fall
on a particular societal issue
Aim

• Helps organizations figure out how to develop and position their future
Positives business strategies in ways society will embrace

• Green zone is characterized by civil learning and latent issue maturity

• The Red zone is characterized by defensive learning and
institutionalized issue maturity
Target • Target for any company is to move to the higher-opportunity green
zone while avoiding the risky red zone
The Civil Learning Tool (2/2)
 How Nike “Just Did It”
Issue
1 Activists launch attack against Nike because of worker conditions in its supply chain

Defensive
2 Nike’s Reaction: “We’ve got the best corporate values, so why aren’t you yelling at others”

Compliance
3 Eventually, Nike responded to activists demand for labour codes and for external audits

Managerial
In 1996, they went professional in creating their first department specifically for managing supply
4
chain partners’ compliance with labor standards

Strategic
By 2000, they had made their labour compliance team stronger. They hired costly external
5
professionals to audit their 900 odd suppliers. Still, others doubted their labour codes.

Civil
Nike realized the need to manage CSR as a core part of its business. They changed procurement
6 methods, supply chains and labour codes. They adjusted their business model to effectively build
tomorrow’s success without compromising today’s bottom line
 Implications for Businesses Today

• The talked-up benefits of corporate responsibility are, at best, hard-

won and in the short term are non existent

• Easier for companies to focus on the low hanging fruit of employee

morale or being defensive when accusations arise

• Need to make business logic out of a deeper sense of CSR

• Industries need to move towards lean manufacturing – shifting

away from top-down approach to greater worker self management

• Will help in delivering greater productivity and better worker

conditions and happier stakeholders over time