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RESPONSIBLE MANAGEMENT

CSR and HRMEmbedding CSR in the organizational DNA

Dr. Nathalie Crutzen

Assistant Professor (HEC-Ulg)Visiting Professor (ESC Rennes)

June 2012

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Agenda1. Lecture

o Introductiono Implementation of the CSR strategyo Sustainability Performance Managemento Conclusions

2. Playing roles (Siemens)o Advocateso Criticso Discussion/Debate

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How to integrate the principles of Sustainable Development within the firm’s DNA?

http://www.youtube.com/watch?v=fk67y3JTfkk

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"Many companies find themselves … stuck between their convictions and

their actions." Christine Arena, Cause for Success, p. 8

The Traditional Strategic Process

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• Four steps in all strategic process– PLAN : Strategy and

related objectives

– DO : Implementation of the strategy

– CHECK : Performance measurement: do the expected objectives have been met?

– ACT: Identification of needed changes in order to improve the firm’s strategy and performance

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Embedding CSR into the organization…a strategic issue…

…at all levels of the organization…… during the various stages of the strategic process…

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Values Mission

StrategyGoals

ObjectivesImplementation Metrics

"Means"StructureCultureEngagementLeadershipHR policiesCodes of conduct

Sustainability Performance Management

KPIsBalanced scorecard

Example: “Patagonia (a pioneer in environmentalism) exists as a business to inspire and implement solutions to the environmental crisis.”

- Social - Environmental- Economic dimensions

A link is essential An integration is ideal!

4 Steps of a CSR Strategic Process1. Planning - Designing CSR or Sustainable Strategies

• Identify key areas of progression (Diagnosis, stakeholders’ analysis)

• Set specific goals based on values and mission statement (clear, measureable objectives)

• Design CSR/Sustainable strategies (How will you reach these goals?)

2. Implementation: Directing the firm towards set goals

3. Evaluation– Continuous evaluation– Regular (internal and external) audits and reporting

4. Improvement of the Strategy On the basis of the results/feedback from Phase 3.

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http://www.youtube.com/watch?v=B2d0oM5MwM8

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How to embed CSR into organizational DNA?

• During the various steps , it is essential to: 1. Consider CSR issues2. Ensure top management commitment3. Link core company strategy to CSR triple B.L. 4. Identify, consult, and engage major stakeholders

and identify benefits for them

5. Elaborate and implement a code of conduct accepted by all, including foreign subsidiaries (2)

6. HRM: recruit, train, evaluate, compensate (incentives and bonuses) according to CSR objectives (2)

7. Leadership vision, example, empowerment (2)

8. Manage and monitor your sustainability performance (3) 9

The Traditional Strategic Process

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Embedding CSR: An implementation at three levels

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Individual managers and employees •Values•Strength of values•Locus of control

Organizational structure•Specific department? Committee?•Formalization - How things are done (code of conduct)- Authority – who reports to whom- Appraisal & reward systems

Organizational culture

•Leadership•Values & behaviors•Strength of culture

Environment (competitors, stakeholders, etc)

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Written codes of conduct• “Voluntary set of commitments that e i ther influence corporate att i tudes and

behaviors or are undertaken by the corporat ion to define thei r intent ions

and/or act ions wi th regard to eth ica l and others issues, or towards stakeholders

f rom a market –based perspect ive”• Two main types: company or multi-stakeholder codes• ! Should be embedded in company values and actions –

specific, not a catch-all solution, not green washing• Examples: Body Shop, Nokia• Content

– Depends on the Strategy (and related CSR program/agenda)

– Can include values, standards, expectations, and guidelines for decision making

– Avoid vagueness and multiple interpretations possible

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Written codes of conduct• Role of the CSR/ethics committee:

– Organize training– Monitor use– Explain how to report violations– Guarantee anonymity

• Employees– Should be included during the code's development

stage– Should not just see the code as another way to

control their behavior– Should be trained in the code's objectives and use,

inc. how to report violations.

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Potential problems with CoCs

• Vagueness of purpose and procedure

• Incompleteness

• Lack of implementation or monitoring

• Lack of training

• Lack of independent monitoring

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Embedding CSR in the culture• Leaders

– Vision, values

– Communicate

– Walk the talk, be an example

– Empower managers and employees Engagement

http://www.youtube.com/watch?v=rMSnf64Wtcs

http://www.youtube.com/watch?v=6hbkvUun_xA&feature=related

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Embedding CSR in the culturehttp://www.youtube.com/watch?v=jtQ3Q9X_bpw

• HR management– Recruiting people with company values– Socialization– Training– Evaluating and compensating responsible behaviors and

outcomes– Employees will be motivated with respect to sustainability

strategy if• They see actions, not "green washing"• They perceive CSR as beneficial to customers, themselves,

other stakeholders– Allow time for involvement in CSR initiatives

• Ex: Community actions (Toyota)• Ex: Green Mountain Coffee: visit fair trade growers

http://www.youtube.com/watch?v=nj295ddf0z8

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CSR/Ethics training• During the implementation of a sustainable

strategy, importance of trainings in the field of Sustainable Development, Ethics and CSR

– Raises awareness of objectives, key issues, and increases visibility of corporate values

– Provides tools to make decisions and think through consequences

! Best carried out by line managers who know the culture, not by consultants

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Some still don't get it…

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Source: Adams, Scott (1997), The Dilbert Principle, Harper Paperbacks

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… even after training

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Source: www.dilbert.com, July 19, 2003

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Summary - Role of HRM• HRM is a key-department in the implementation of CSR

objectives/actions • It should facilitate the achievement of these objectives

thanks to, for example,:– Recruitment of adequate people in a responsible way (responsible

procedures)– Training and learning and development plans– Diversity plans: audits, processes’ review (recruitment campaigns-

screening process – career evolution- vertical position in the company)

– Diversity positive action plans: mentoring, traineeships,…– Health & Safety plans and committees– Flexibility programs– Fair promotion procedures– Adequate incentive and rewards procedures– Retirement plans– Etc.!! Communication is important!! (in line with line managers) !!

The Traditional Strategic Process

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Global Performance

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-Less air pollution (CO2 emissions)-Less water pollution-Waste reduction-Etc.

-Diversity (race, sex, religion, age)-Staff well-being- Local communities-Etc.

-Profitability-Solvency-Liquidity-Self-financing (Cash flow)-Etc.

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Performance Management

• Definition: Set of tools, systems and procedures in order to manage, measure and evaluate the (social, environmental, social or sustainability) performance of an organization (Merchant and Van der Velde, 2007)

• MANAGE = to help to translate the sustainable strategy into clear objectives for each department, each worker in order to facilitate the achievement of these strategic objectives and feedback (via adequate tools)

• MEASURE /EVALUATE = to check if the predetermined social, environmental and economic objectives have been reached and to draw the adequate conclusions (feedback) for the future : Why (not)? How to improve the performance? Etc.

• COMMUNICATE with stakeholders

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Why measure and manage sustainability performance?

• Some (famous) reasons: To check if the predetermined objectives have been

achieved or not: Are we performing well? Is our work useful? Which (social) objectives have effectively been reached or not? Why? Clearer and more objective view/feedback of the firm and of its real contribution to the Society Ability to work harder on unachieved objectives (Why not? Which strategies could we implement to reach them?) Better internal decision making

Legitimate the activities/efforts externally and internally (pressures)

The use of adequate performance management tools may lead to an easier and quicker achievement of some objectives (thanks to a better communication, a clear translation of the strategy to various departments, a more regular follow-up of the results, etc.)

http://www.youtube.com/watch?v=0NW1BkHbE_g&feature=relmfu

Environmental Performance Indicators (KPIs)

• Indicators which can be organized into several categories: – Water Pollution and Withdrawal (eg. Total water withdrawal

by source)– Air Pollution (eg. CO2 Emissions by weight of products

made)– Energy (eg. Direct energy consumption by primary energy

source)– Recycling (eg. Percentage of materials used that are

recycled input materials)– Biodiversity (eg. Habitats protected or restored)– Transport issues– ETC (See GRI)

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Social Performance Indicators

• Internal Social Performance– Staff Turnover– Absenteeism– Number of Training Hours per staff member– Diversity (sex, race, etc.)

• External Social Performance – Societal Performance– Number of unemployed people who where engaged– Worries about the effect of advertising– Effects of the product(s) on public health– Percentage of suppliers who have integrated the ILO

principlesSee Document GRI…

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• A multidimensional strategic performance management tools which helps to translate the business strategy into clear objectives and clear related performance indicators

• Combination of financial and non-financial indicators organized into 4 dimensions– Learning and Development (LT)– Finance (ST)– Customers (External)– Internal Processes (Internal)

• Balance between – LT – ST– Internal – External– Quantitative – Qualitative / Monetary – Non-monetary

indicators – Strategic – Operational information

The Balanced ScoreCard

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The Balanced ScoreCard

http://www.youtube.com/watch?v=oNy8kupW8oI&feature=related

The Sustainability Balanced ScoreCard

• Two major approaches to adapt the BSC (in parallel with the issue of integration and strategic CSR, see previous session)

– Decoupled approach• Construction and use of TWO separate BSC• Core/Traditional BSC + Societal BSC• High risk of green/social washing – marketing use…

– Integrated approach• Integration of environmental and social dimensions into the

core business performance management• In order to manage and measure the interaction between

the business, the environment and the Society29

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The integrated Sustainability Balanced ScoreCard

Proposition 1:

STAKEHOLDERS

GOAL Improve securityINDICATOR- Mean

More regular control of the equipment

- OutputDecrease in the number of accidents

The integrated Sustainability Balanced ScoreCard

Proposition 2:

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SBSC

Financial perspective

NON-MARKET

PERSPECTIVE

Business Process

Perspective

Learning & Development Perspective

Customer Perspective

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Embedding CSR in the company's DNA Conclusion

• Ensure top management commitment

• Link core company strategy to CSR triple B.L.

• Identify, consult, and engage major stakeholders. Identify benefits for them.

• Set specific CSR objectives.

• Implement a code of conduct accepted by all, including foreign subsidiaries.

• HRM: recruit, train, evaluate, compensate according to CSR objectives.

• Allocate staff and budget to CSR.

• Check, track and report your sustainability performance

• Leadership vision, example, empowerment.

From Here to There: 4 tips

1.Get the Right Start2.Build Buy-In3.Move from Incremental to

Breakthrough4.Stay With It!

Get the Right Start

• Sincere sponsorship from the TOP!• Gain key insights: read / look around

& learn!• Establish the baseline: data to reflect

your starting point

Build Buy-In

• Create a community: meet regularly• Get your hands dirty: do real projects• Communicate clearly & consistently• Keep the attention high: do cool things!• Engage customers, suppliers, community

activists & beyond: involve a wide span – makes it more tangible to everyone

• Embed sustainable value creation in HRM Systems

Move from Incremental to Breakthrough

• Finding the fit– From independence to interdependence– From marginal PR issue to essential business

factors– From only short-term to balance of short/long

term

• Change at the scale of the whole system– Don’t get stuck in pieces/parts: address how they

fit together (// sustainable strategy)

Stay With It!

• Set Ambitious Goals!• Measure Progress with Key Indicator

Indices• Articulate Learning• Sustain Energy:– Celebrate Wins!– Refresh Teams / Individuals– Renew the Purpose

Summary • Sustainability is no longer an option – business has a major

role to play

• Strategic = economic, social, and environmental benefits

• Leadership is essential but must filter down to all levels

• Performance management is necessary to ensure the performance of the CSR strategy (achievement of the predetermined goals)

• !!! Business opportunities: eco-product design, building design, clean technology, use of renewable energies, waste management, recycling, green supply chain management,…

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References• A New Era of Sustainability: UN Global Compact-Accenture CEO

Study 2010• Arena, C. (2004), Cause for Success: Ten Companies that put

profits second and came in first, New World Library, Novato, California.

• Crane A., Matten D. & Spence L. (2008), Corporate Social Responsibility: Readings and Cases in a Global Context, London and New York, Routledge, 2008

• Crane, A., McWilliams A, Matten, D., Moon, J. and Siegel D. (2008), The Oxford Handbook of Corporate Social Responsibility, Oxford University Press

• Lubin, D. and Esty, C. (2010), “The Sustainability Imperative,” Harvard Business Review, May

• Porter, M. (2011), Creating Shared Value, Harvard Business Review, January-February

• Schaltegger, S. & Wagner, M. (2006): Managing Sustainability Performance Measurement and Re porting in an Integrated Manner. Sustainability Ac count ing as the Link between the Sustainability Balanced Scorecard and Sustainability Reporting, in: Schaltegger, S.; Bennett, M. & Burritt, R. (Eds.) (2006): Sustainability Accouting and Reporting, Dordrecht: Springer, 681-698.

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