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Corporate Social Responsibility

Corporate social responsibility (CSR) is:

An obligation, beyond that required by the law and economics, for a firm to pursue long term goals that are good for society. The continuing 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 that of the local community and society at large. About how a company manages its business process to produce an overall positive impact on society.

A companys sense of responsibility towards the community and environment (both ecological and social) in which it operates. Companies express this citizenship (1) through their waste and pollution reduction processes, (2) by contributing educational and social programs, and (3) by earning adequate returns on the employed resources. See also corporate citizenship. Corporate initiative to assess and take responsibility for the company's effects on the environment and impact on social welfare. The term generally applies to company efforts that go beyond what may be required by regulators or environmental protection groups. Corporate social responsibility may also be referred to as "corporate citizenship" and can involve incurring short-term costs that do not provide an immediate financial benefit to the company, but instead promote positive social and environmental change Corporate social responsibility (CSR, also called corporate conscience, corporate citizenship, social performance, or sustainable responsible business/ Responsible Business) is a form of corporate self-regulation integrated into a business model. CSR policy functions as a built-in, self-regulating mechanism whereby a business monitors and ensures its active compliance with the spirit of the law, ethical standards, and international norms. The goal of CSR is to embrace responsibility for the company's actions and encourage a positive impact through its activities on the environment, consumers, employees, communities, stakeholders and all other members of the public sphere who may also be considered as stakeholders. The term "corporate social responsibility" came into common use in the late 1960s and early 1970s after many multinational corporations formed the term stakeholder, meaning those on whom an organization's activities have an impact. It was used to describe corporate owners beyond shareholders as a result of an influential book by R. Edward Freeman, Strategic management: a stakeholder approach in 1984. Proponents argue that corporations make more long term profits by operating with a perspective, while critics argue that CSR distracts from the economic role of businesses. Others argue CSR is merely window-dressing, or an attempt to pre-empt the role of governments as a watchdog over powerful multinational corporations.

CSR is titled to aid an organization's mission as well as a guide to what the company stands for and will uphold to its consumers. Development business ethics is one of the forms of applied ethics that examines ethical principles and moral or ethical problems that can arise in a business environment. ISO 26000 is the recognized international standard for CSR. Public sector organizations (the United Nations for example) adhere to the triple bottom line (TBL). It is widely accepted that CSR adheres to similar principles but with no formal act of legislation. The UN has developed the Principles for Responsible Investment as guidelines for investing entities.

Some commentators have identified a difference between the Canadian (Montreal school of CSR), the Continental European and the Anglo-Saxon approaches to CSR. And even within Europe the discussion about CSR is very heterogeneous. A more common approach of CSR is philanthropy. This includes monetary donations and aid given to local organizations and impoverished communities in developing countries. Some organizations do not like this approach as it does not help build on the skills of the local people, whereas community-based development generally leads to more sustainable development. Another approach to CSR is to incorporate the CSR strategy directly into the business strategy of an organization. For instance, procurement of Fair Trade tea and coffee has been adopted by various businesses including KPMG. Its CSR manager commented, "Fairtrade fits very strongly into our commitment to our communities." Another approach is garnering increasing corporate responsibility interest. This is called Creating Shared Value, or CSV. The shared value model is based on the idea that corporate success and social welfare are interdependent. A business needs a healthy, educated workforce, sustainable resources and adept government to compete effectively. For society to thrive, profitable and competitive businesses must be developed and supported to create income, wealth, tax revenues, and opportunities for philanthropy. CSV received global attention in the Harvard Business Review article Strategy & Society: The Link between Competitive Advantage and Corporate Social Responsibility by Michael E. Porter, a leading authority on competitive strategy and head of the Institute for Strategy and Competitiveness at Harvard Business School; and Mark R. Kramer, Senior Fellow at the Kennedy School at Harvard University and co-founder of FSG Social Impact Advisors. The article provides insights and relevant examples of companies that have developed deep linkages between their business strategies and corporate social responsibility. Many approaches to CSR pit businesses against society, emphasizing the costs and limitations of compliance with externally imposed social and environmental standards. CSV acknowledges trade-offs between short-term profitability and social or environmental goals, but focuses more on the opportunities for competitive advantage from building a social value proposition into corporate strategy. Many companies use the strategy of benchmarking to compete within their respective industries in CSR policy, implementation, and effectiveness. Benchmarking involves reviewing competitor CSR initiatives, as well as measuring and evaluating the impact that those policies have on society and the environment, and how customers perceive

competitor CSR strategy. After a comprehensive study of competitor strategy and an internal policy review performed, a comparison can be drawn and a strategy developed for competition with CSR initiatives.

CSR business benefits:

In particular, the potential business benefits derived from the implementation of corporate social responsibility are the following: > Risk Management: Modern organizations implement risk management strategies to decrease or even eliminate the risk posed on the organization by a variety of practices associated to several potential threats. Risk management is of vital importance to many corporate strategies. Organizations that have made strong efforts over the years to build a good reputation and have spent a lot of money to maintain it through product development and customer loyalty strategies, may be ruined is seconds due to a corruption scandal (Enron scandal) or an environmental accident (Chernobyl disaster). Such incidents draw the attention of the media and may cause irrevocable damage to the reputation of a firm. The only way to anticipate such events is to embed social responsibility into organizational culture in order to offset such risks. > Product differentiation:

Organizations that want to remain competitive and viable in today's marketplace need to offer differentiated products. Through product differentiation, organizations aim at achieving a competitive advantage by increasing the perceived value of their products relative to the perceived value of the products of their competitors. Particularly, for organizations that implement socially responsible policies, product differentiation can satisfy the unmet needs of consumers offering both financial and business benefits to the firm. Firms that offer environment friendly products experience higher sales growth than firms that sell conventional products, and usually such products sell at a higher price. Besides, firms that offer unique value propositions to consumers differentiate their products in consumers' minds and contribute to building customer loyalty based solely on ethical values. Therefore, in the context of corporate social responsibility, organizations develop new products aiming, not only to become more competitive, but also to make a greater impact on society through their ethical practices. > Employee motivation: Organizations that are socially responsible are more likely to recruit and retain their human capital easier. A 2007 research by Kenexa Research Institute (KRI) that surveyed employees from six countries (USA, Brazil, China, India, UK, Germany), suggests that when employees have a positive view for the organization's CSR strategies, they are more willing to work for it, participate to its efforts, align with its culture and recommend it as the best place to work. Employee satisfaction deriving from corporate social responsibility leads to higher productivity, higher employee retention rate, better organizational performance, and ultimately, higher profitability. Conclusively, although the benefits of corporate social responsibility cannot be explicitly measured as they are primarily based on the nature of the business, they are numerous and they cannot be neglected. Particularly, in an era that the protection of the environment is imperative and global warming threatens human existence, social responsibility is the least organizations can demonstrate to provide an optimistic future. Besides, the opportunities offered for exhibiting responsiveness to social, economic, environmental and ethical issues are numerous. At the end of the day, it is to their long-term interest to undertake socially responsible initiatives Corporate social responsibility is a model of business which is heavily rooted in responsible ethics. A company that adopts this strategy may enjoy several benefits from a positive consumer image to higher sales and worker output. Corporate social responsibility requires a company's full dedication and resistance to cutting corners on materials and employee benefits, which could ultimately serve to damage the company's image.

Better Brand Image and Reputation:

According to the International Institute for Sustainable Development, a company who adopts a business model involving corporate social responsibility is able to develop a better image for its brands and a more positive company reputation. The image of the company and its products are improved because consumers believe the company to be ethically

responsible in creating products with only quality materials and using manufacturing techniques which don't pose a threat to the environment.

Increased Worker Productivity:

Corporate social responsibility places an emphasis on taking care of workers in the form of competitive wages and helpful benefits like health care and retirement plans. This leads to increased worker productivity because the employee feel the company cares and supports them and they in turn work harder. The company isn't viewed as the villain in a corporate social responsibility model but the helping hand.

Greater Customer Loyalty:

Consumers like to purchase quality products for a fair price. A business that uses corporate social responsibility can build customer loyalty on the strengths of how its products are made and the ingredients which go into them. According to Santa Clara University's Markkula Center for Applied Ethics, an example of this form of brand loyalty is found in the organic food industry where companies readily tell consumers what's in the product to show consumers the quality ingredients and health benefits of buying from them.

Lower Regulatory Oversight:

A company that deals with the environment and its business matters in an ethical, responsible way ultimately nets less government oversight than a company looking to shave the edges of what's legal. This leads to a lower chance of expensive fines and sanctions by federal and state regulatory agencies. State and federal government officials may even seek out a company with a socially responsible reputation for opinions on shaping policy in the company's field.

Dimensional Aspects Of Corporate Social Responsibility:

The purpose of corporate social responsibility (CSR) is to make corporate business activity and corporate culture sustainable in three aspects: Economic aspects. Social aspects. Environmental and Ecological aspects. Lets take them one by one

Economic aspects of CSR

The economic aspects of CSR consist of understanding the economic impacts of the companys operations. Economic issues have long been overlooked in the discussion on corporate social responsibility. For many years, the aspect has been widely assumed to be well managed. However, it is actually the least understood by many of those shaping the corporate and public policy agendas, and underrepresented the corporate responsibility agenda. The economic aspects of CSR is often mistakenly considered to be synonymous with financial issues, which is why it has been assumed easier to implement than the other two pillars of the temple. However, the economic responsibility is not simply a matter of companies being financially accountable, recording employment figures and debts in their latest corporate responsibility report. The economic dimension of the sustainability agenda should rather consider the direct and indirect economic impacts that the organizations operations have on the surrounding community and on the companys stakeholders. That is what makes up corporate economic responsibility.

a) The Multiplier Effect: The economic performance of a company has direct and indirect impacts on all of its stakeholders including its employees, local governments, non-profit organizations, customers, suppliers, and the communities in which the companies operates. For Daffodil International University Journal of Business and Economics, Vol. 3, No. 1, January 2008 205 example: a good economic performance makes it possible to develop operations for the long term and to invest in development and the well-being of employees. The employees of the company get good salaries, from which they purchase goods and services as well as pay taxes. These activities fuel the local service industry, government programs and the community activities. This multiplier effect becomes all the more important if the company is one of the largest employers in the communities. b) Contribution through taxes: Companies are major contributors to the well-being of the area surrounding their operations, for example through the local tax base. Therefore, the question arises: is it responsible for a business to see corporate taxes purely as to cost be avoided, rather than part of their social contract with society? Taxes have a significant impact on the creation and distribution of wealth: tax avoidance, though perfectly legal, deprives the community in the area of the companys operation of well-being. c) Avoiding Actions that Damage Trust: A companys license to operate depends upon the trust and support of the local communities where it operates. The shift in power from the public the private sector emphasizes the importance of this trust and the obligations and responsibilities that come with it. Some company activities are potentially very destructive to the trust earned from the community or otherwise cannot be regarded as economically responsible. These should be avoided or at least carefully considered. Example of such harmful company behavior include: bribery and corruption, tax avoidance: and concentration of rewards and incentives of the companys performance to few individuals only instead of fairer distribution among the personnel. The company should also stop to consider the economic effects of changes in locations and/or operations to the community.

Social Aspects of CSR

Social responsibility is the newest of the three dimensions of corporate social responsibility and it is getting more attention than it has previously had. Many organizations are becoming increasingly active in addressing social concerns social responsibility means being accountable for the social effects the company has on people - even indirectly. This includes the people within the company, in the supply chain of the company, in the community the company is in and as customers of the company which means the whole lot of stakeholder. It refers to the managements obligation to make choices and take actions that will contribute to the well fare and interests of society as well as those of the

organization. The following aspects have been found to be key the social aspects of CSR for an organization: a) Responsibility towards Customers: The idea of treating customers with respect and attention is not new to business: often being responsible to customers has a direct positive effect on the companys profits. There are, however, broader social responsibilities including providing good value for money. These responsibilities may include such issues as the safety and durability of products or services; standard or after sales service; prompt and courteous attention to queries and complaints; adequate supply of products or services; fair standards of advertising and trading; and full and unambiguous information to potential customers. b) Responsibility towards Employees: Businesses are major contributors to the employment generation of the community. However, social responsibility to employees extends beyond terms and conditions of the formal contract of employment. Companies need to come up with wider expectations that todays employees have for the quality of their working life. Such expectations include taking care of the personnels welfare and safety at work and upholding their skills and motivation for the work. Beyond these expectations, a socially responsible company secures a just treatment and equal opportunities for all its employees, regardless of gender, age, race, or religion. c) Responsibility towards the Community: Companies depend on the health, stability, and prosperity of the communities in which they operate. Often majority of the companys employees and customers come from the surroundings area especially so for SMEs. The reputation of a company at it s location, its image as an employer and producer, but also as an actor in the local scene, certainly influences its competitiveness. Many companies become involved in community causes, for example by providing additional vocational training places, recruiting socially excluded people, sponsoring local sports and cultural events, and through partnerships with communities or donations to charitable activities.

Environmental and Ecological aspects of CSR

Environmental concern and sustainable development is a key pillar of the corporate social responsibility. Environmental and ecological issues have been an important topic of discussion for the past thirty years in the business world the longest time of the three dimensions corporate social responsibility. The knowledge and issues within the dimensions have progressed across a landscape of changing business realities. Environmental aspects put in place in the 1970s with the first real understanding of the environmental impacts of business. Now, in the 21st century, we are faced with new challenges.

a) Environmental Impact: Corporate activity may have many types of effect s on the environment. Usually environmental impact refers to the negative effects occurring in the surrounding natural environmental due to business operations. Such impacts may include: overuse of natural, non-renewable resources of energy, pollution wastage, degeneration of biodiversity, climate change, deforestation etc. Since many business related environmental problem transcend national boundaries, most companies s are thus actors in global environment. To obey CSR in case of environmental aspects corporations can take the following steps:

Measuring Environmental Impact:

Environmental impacts can be measured in several ways through environmentally extended input-output tables, material input per service unit (MIPS) calculations, ecological footprint and life cycle assessment, to name a few. Ecological footprint measures the amount of natures resources consumed in a given year, and compares it to the resources available in the world. Life cycle assessment (LCA or eco-balance) is used to assess the environmental performance of a product from raw materials in the beginning of the production process all the way to disposal at the end of use. The MIPS value is calculated by dividing the amount of material the product or service causes to move e.g. the amount of earth moved in mining , not just the metal used during its entire life span by the amount of benefits and value its brings. Environmental Management: To truly commit to its environmental responsibilities a company should change its traditional modes operation towards a more environmentally oriented one. The environmentally more responsible perspective could include such issues as an emphasis on increased resource productivity, cleaner production and active dialogue with the companys stakeholders. Many businesses have found that establishing an environmental management system is the best basis for good environmental performance. Quality, health and safety issues can also be integrated into the same management system . b) The Win-Win of Environmental Responsibility: Several individual companies have found that improving environmental performance may also have beneficial effects on the company itself. Using less material and streamlining processes to create less waste may lower the costs of operation significantly. Moreover, the close review of operations, which is needed to improve the environmental performance, may reveal other improvement points, such as risk and material loss. A responsible public image may also attract more customers. These kinds of improvements as well as the investments behind them are often referred to as win-win good for both the environment and profitability of the company. The principle of win-win situations has been established for a number of years and most recently recognized in the commissions 6th Environmental Action program. The program explains, how the European Union and member State governments can fulfill their role in helping business to identify market

opportunities and undertake win-win investments, the action program also set out a number of other measures aimed at business: establishment of a compliance assistance program to help business understand the environmental requirements of the European Community; development of national, but harmonized, company environmental performance reward schemes that identify and reward good performers and encourage voluntary commitments and agreements.

BHP Billiton
Mission Statement:
"At BHP Billiton our objective is to be the company of choice creating sustainable value for our shareholders, employees, contractors, suppliers, customers, business partners and host communities. We aspire to Zero Harm to people, our host communities and the environment and strive to achieve leading industry practice. Sound principles to govern safety, business conduct; social, environmental and economic activities are integral to the way we do business."

Vision Statement:
BHP Billiton strives to create long-term value through the discovery, development and conversion of natural resources, and the provision of innovative customer and marketfocused solutions. BHP Billiton is committed to a long-term strategy of investing in low-

cost, world-class, expandable and export -orientated operations that reflect diversification across markets and geographic regions. The objective at BHP Billiton is to be the company of choice by creating sustainable value for their contractors, employees, shareholders, suppliers, customers and business partners. BHP Billiton aspires to Zero Harm to people, their host communities and the environment and strives to achieve leading industry practic ABOUT BHP BILLITON In the year 2009-2010 BHP Billiton has continued its involvement in many controversial mines, is advancing risky and unwanted projects and is making advances to acquire assets in known conflict zones. In 2010 BHP Billiton has made steps to report on the revenues it pays to host Governments but has been selective in the information it reports on, excluding important information. BHP Billiton reported the revenues (royalties and taxes) paid to Governments for many of the countries it operates in, but is involved in projects in countries on which it has refused to report. It is the revenue flows that BHP Billiton does not reveal in its reports that raise suspicion, it is these figures the public want to know, it is these figures that would be an opportunity for BHP Billiton to show real leadership in the spirit of true transparency. There are a number of exploration activities that BHP Billiton is involved with that do not feature in its annual report. It is these operations where there are transparency issues in negotiating with Indigenous Peoples, land disturbance and the brokering of deals with local, state and federal Governments and agencies. There must be accountability and reporting of activities, spending and negotiations at the exploration stage if BHP Billiton is to demonstrate transparency and corporate responsibility. The BHP Billiton mines, exploration projects and assets that feature in this Alternative Annual Report are those where one or more of the following issues has been prevalent; human rights abuses, labour rights, relocation of communities, mistreatment of Indigenous Peoples, destruction of sacred sites, devastating impacts on food and water, climate change, use of paramilitaries, health concerns, irresponsible tailings disposal procedures and questionable corporate social responsibility practices. In 2007 the United Nations enshrined the rights of Indigenous Peoples to Free Prior and Informed Consent (FPIC) in the UN Declaration on the Rights of Indigenous people. In 2010 BHP Billiton still does not officially accept this principle. In 2011 the new OECD Guidelines for Multinational Enterprises will be released. Within these guidelines we can expect to see FPIC acknowledged. FPIC means that consent is given free of coercion or manipulation, before the commencement of any activities, and with full disclosure of information that is understandable and accessible to communities. If consent is not given, then proposed activities must not take place. To date, BHP Billiton has merely noted that there are a wide diversity of views on FPIC, and fails to rise to the challenge needed to genuinely implement it. Exploration prior to mining includes land disturbance. It also includes negotiating access to land. BHP Billiton did not report on exploration in its 2010 Annual Report (BHP Billiton

Sustainability Report 2010) despite the gravity of its environmental and social impacts. This stage of mining also includes negotiating or brokering land deals, a process referred to in the mining industry as gaining a social licence to operate. This is a process that can cause division in communities, making them vulnerable to manipulation by vested interests. Access to non-biased information becomes problematic, and these deals may misrepresent the true position of Indigenous and other affected communities. There are many social impacts that arise alongside mining developments, including the influx of alcohol, drugs, prostitution, sexually transmitted diseases and conflict within communities over land ownership, gender roles, the relative power of women, royalties and compensation. There are many other social impacts that relate to the health of the environment (like access to food and clean water, and contamination of land and water), and access to traditional cultural sites as well as homelands, all of which can easily be affected by mining operations. BHP Billiton may agree in theory on upholding human rights but in 2009-2010 there was no reporting on human rights risk assessments or material risk identification, showing a lack of commitment in this area. While BHP Billiton has a policy on human rights, as explained within its Sustainability Framework, and is a signatory to a number of voluntary agreements on human rights, it is apparent from the following case studies that policy does not equate to practice. Many of the countries that BHP Billiton operates in have poor records on corruption, poor human rights records and a high level of militarisation, and are willing to make serious compromises for desperately needed foreign investment. These are all factors that often create an environment that undermines the rights of communities when faced with a form of development they oppose. BHP Billiton, the largest diversified resource company in the world, has a unique opportunity to embrace one of the most progressive principles in human rights: FPIC as acknowledged by the United Nations. BHP Billiton also has the opportunity to begin a transition out of dirty energy minerals (oil, uranium and coal). We call on BHP Billitons shareholders and board to consider the opportunities that exist in renewable technology and exercise the moral responsibility to lead the way on environment and social behavior

CSR In BHP Billition Reducing our impact on the environment:

As a global producer, exporter and consumer of energy, our challenge is to meet the demand for our resources from around the globe and reduce our impact on our environment.

Engaging on climate change:

We are committed to managing the risks associated with climate change. Our social and economic responsibility is to constructively engage on climate change issues and understand the risks and opportunities. This ensures we can reduce our own impact on the environment and make a positive international contribution.

Managing our water use:

We have a large global footprint and take the responsibility for managing our environmental impact very seriously. Water is an essential resource for all of our operations and production can be impacted by both quality and quantity of water available. More importantly, the communities within which we operate rely on having access to clean, safe drinking water. This is critical to sustaining local health, industry and a sound environment.

Making a positive contribution:

As a large organization, we have an economic and social responsibility to contribute in a positive way to the communities, regions and countries where we operate. By developing partnerships with our host communities, we are helping to foster sustainable development, share the socio-economic benefits from our operations and alleviate poverty.

Investing in community programs:

We voluntarily invest one per cent of our pre-tax profits in community programs on a three year rolling average, including cash, in-kind support and administration. During FY2011, our voluntary community investment totalled US$195.5 million, comprising cash, in-kind support and administrative costs and included a US$30 million contribution to our UKbased charitable company, BHP Billiton Sustainable Communities.

Supporting employees who are supporting our communities:

Many of our employees make a valuable personal contribution to their local community, giving their time and expertise to a range of activities. We support their efforts through our global Matched Giving Program. This program strengthens local communities by supporting and encouraging employees, who volunteer, fundraise or donate to not-forprofit organizations by matching their contributions.

Understanding and managing our human rights impact:

We respect and promote fundamental human rights and the value of cultural heritage. We are committed to operating in accordance with the United Nations Universal Declaration of Human Rights and the Global Compact. We have a responsibility to understand our potential impacts on human rights and to mitigate or eliminate them.