Ethics in the International Context

Wednesday, May14th 2014

Prof. Birgit Weyer, M.Sc., D.M.

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1 What are goals of today‘s lecture?

They are able to construct a business case for CSR

Students know how CSR can be measured

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2 Possible Results of CSR

Source: Hansen & Schrader, 2005

- Increasing stock price

- Raising sales volume

- Lowering cost

- Increasing ROI

- Building and maintaining reputation to: - Acquire and keep customers - Attracting, motivating,and keeping employees

- Good-Will und Licence to (co-) operate through government and NGOs

- Decreasing risks

Vorökonomische WirkungenPre-economic Economic

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2 Questions: Article Porter & Kramer„Strategy and Society“

What are the hypothesis made?

What are the recommended approaches?

What are the examples given?

What is the conclusion?

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3 How to Measure Success?

Institution specific rating-models are based on international norms and conventions

- Declaration of human rights (UN)- Working norms of the International Labor Organization (ILO)- Guidelines for multinational companies (OECD) - Environmental nrms

„There is no generally accepted norm“, (Schäfer, Transparency Study of Bertelsmann Foundation)

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3.1 Approaches to the Measurement of CSR

Risk assessmentEvaluation of the companies assessment on environmental and social risks

Sustainable growth of company valueEarly recognition and implementation of economic, ecological, and social trends generates competitive advantages, e.g. Investing in human capital and growing ecological efficiency

Above average growth through „Innovators“ Ecological and economic chance which are derived from an innovative product or production process in the ecologic realms

Management models (mainly Continental Europa)

Strategy, planning, operational implementation, assessment and reporting as well as interaction with stakeholders

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3.2 Examples for Reporting

AccountAbility 1000 (AA1000)Standard for social and ethical reporting and auditing.Supports companies to identify KPI and goals in relation to social impact, measure advances, and to report these.

Global Reporting Initiative (GRI) Globally recognized guidelines for CSR Reporting. Approach is to compare reporting of the triple bottom lines.Goal is to have more transparency.Application of CRI guidelines is optional.

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CSR Evaluation –Global Reporting Initiative

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Balanced Score-Card as Rating Instrument for CSR

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(Quelle: Kaplan und Norton, 1996)

Balanced Score-Card as Rating Instrument for CSR

• Management Instrument to derive and control strategic actions for CSR

• Enhances transparency of goals and allows for evaluation

• Integration of triple bottom line and respective goals leads to „Sustainability Balanced Scorecard“

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3.3 CSR Measurement in Practice

55 large organizations in consumer goods and trade

CSR based in Public Relations, Production, CSR/Environmental Dept.

Reputation and personal conviction are most often named as a reason for CSR activities

86% of companies publish CSR reports

71% use international standards (z.B. CERES, GRI) for reporting

29% ask for an independent audit

Economic factor is not reported to be important

Correlation between sustainability and increased ROI difficult to prove

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Deloitte und Touche GmbH (Ed.) (2009): Corporate Social Responsibility: Value Chain Mgmt., Tohmatsu

3.4 CSR from an Investors Perspective

Dow Jones Sustainability Index (DJSI) since 2001

DJSI-World listed companies are chosen from the 2.500 members of Dow Jones Global Index

The best 10% of each line of business are listed after a positive screening related to the triple bottom line (KPIs have different weight)

DJSI is shown against benchmark-indexes z.B. MSCI (Morgan Stanley Capital International Inc.) in order to check whether an investment is worth it

Based on "backcasting") to the year 1993 seen critical

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CSR from an Investors Perspective

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Quelle: Sam Indexes GmbH (2011), Hauptframe

3.5 CSR – a Metaanalysis

Margols & Walsh, 2001

Metaanalysis of 95 studies from 1972 – 2000

70 different methods to measure financial consequences of CSR on financial performance of companies

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(Quelle: Schwerk, 2011, S.3)

Correlation CSR and Financial Performance

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