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Corporate Responsibility
Dr Lance Moir
June 2006
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Structure
What is Corporate Responsibility?
Current Pressures
Value and Corporate Responsibility
The approach at Leading Companies
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What is corporate responsibility?
The triple bottom line
Economic
Social
Environment
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What is Corporate Responsibility?
Behaviour & conduct/good governance
Responsible impact on society
Accountability & transparency
Stakeholder engagement
Reputation & risk management
Socially responsible investment
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The issues being addressed by CR
Supply chain
Human rights
Plant closures
Charitable giving
Work life balance
Cause related marketing
Environmental pollution
Sustainability
These mean different things to different firms
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World-wide critical events and issues
1970s Apartheid era South Africa - racial discrimination
1970s Nestle - marketing of breast milk substitute
1984 Union Carbide in Bhopal, India - environment
1995 Shell in North Sea (Brent Spar) - environment
1995 Shell in Nigeria (Ogoni) - distribution of resources
1996 BP in Colombia - security forces & complicity
2000 Mars, Cadbury, Hershey, Ivory Coast - child labour
2000 Chiquita, Del Monte etc., C. America - association
2000 Adidas in Pakistan - child labour
2002 Talisman in Sudan - complicity in repression
2000s Nokia, Motorola, Congolese Coltan - forced labour
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Reasons for the focus on Business &Society
Globalisation - increasing trade Markets growing faster than social and political
structures
Sheer scale of business (51 of the top largest
economic entities are corporations)
Technology
Growth of the internet and available data
Increase of NGOs (non-governmental organisations)
Increase in democracy
Growth ofSRI (socially responsible investing)
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CR-related standards, guidelines and codes ofconduct
Now over 300 external CR tools, guidelines and codes of practice
Global Sullivan
Principles
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The Global Compact
Human Rights
Human Rights within sphere of influence Complicity with rights violations - repression & conflict
Labour
The right to collective bargaining & freedom of association
Eliminate forced and compulsory labour
To effectively abolish child labour To end discrimination in the workplace
Environment
To support a precautionary approach to the environment
Promote greater environmental responsibility Encourage the diffusion of environmentally friendly technology
Anti- Corruption
Work against all forms of corruption, including extortion andbribery
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What is corporate social responsibility?
The traditional model
Socialresponsibility
Business
Philanthropy in response to appealsfor help from society and socialinvestment in projects of long-termimportance to the company
This is the core activity of thecompany providing the goodsand services society wants
The benefits of business
Investment
Jobs created
Taxes paid
Goods &Services
Technology transfer
Import substitution
Export earnings
Development of suppliers
Human Resources Development
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Four-Part model of Corporate Social Responsibility
Type of Responsibility Societal
Expectation Examples
Philanthropic
Ethical
Legal
Economic
DESIRED of
business by
society
EXPECTED of
business by society
REQUIRED of
business by society
REQUIRED of
business by society
Corporate contributions.
Programs supporting community/education.
Community involvement/improvement; volunteerism
Avoid questionable practices.
Respond to spirit of laws.
Assume law is a floor behavior; operate above minimum requiredby law.
Assert ethical leadership.
Obey all laws; adhere to regulations.
Environmental laws.
Consumer laws.
Laws affecting all employees.
Obey Foreign Corrupt Practices Act.Fulfil all contractual obligations.
Be profitable.
Maximise sales revenue.
Minimize costs (administrative, production, marketing, distribution).
Make wise strategic decisions.
Be attentive to dividend policySource: Carroll (1979))
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Carrolls Corporate Social Performance Model
Proaction
Accommodation
Defense
Reaction
Philosophy of Social Responsiveness
Consumerism
Environment
Discrimination
Product Safety
Occupational Safety
Shareholders
Social Issues Involved
Social ResponsibilityCategories
DiscretionaryResponsibilities
EthicalResponsibilities
LegalResponsibilities
EconomicResponsibilities
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The Three-Domain Model of Corporate Social Responsibility
(vii) Economic /Legal / Ethical
(vi) Legal
/ Ethical(iv) Economic /
Ethical
(iii) Purely Ethical
(v) Economic/ Legal (ii) Purely Legal(i) Purely Economic
Source: Schwartz & Carroll, Business Ethics Quarterly, 2003
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Categories in the Three Domain Approach
Purely economic Lockheed bribes / Andersen
shredding
Purely legal tobacco health warnings
Purely ethical Merck donation of drugs
Economic/ethical sponsorship of arts
Economic/legal Chapter 11 of Dow Corning?
Legal/ethical Giving drugs at below cost to Africa?
Economic/legal/ethical WalMart stops selling
cigarettes in Canada
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Corporate Social Responsibility Portraits
Economic Orientation (e.g., CEO of Acme of Co.)
Ethical
Legal
Economic
Source: Schwartz & Carroll, Business Ethics Quarterly, 2003
Legal Orientation (e.g, Legal Dept)
Econ
Ethical
Legal
Ethical Orientation (e.g., Consumers Desired Toy Co.) Balanced Orientation (e.g., Toy Industry)
Econ Legal
Ethical Ethical
Econ Legal
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How do firms look at CSR?
The World Business Council for Sustainable Developmentproposes a definition for CSR as:
the ethical behavior of a company towards society. .management
acting responsibly in its relationships with other stakeholders who
have a legitimate interest in the business.
and
CSR is the continuing commitment by business to behave ethically
and contribute to economic development while improving thequality of life of the workforce and their families as well as of the
local community and society at large.
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The Management of Corporate Responsibility
Defensive (pain alleviation)
Traditional (cost-benefit)
Strategic - shifts business into a new direction. Thuspart of corporate strategic intent
Learning, innovation and risk management
Zadek (2001)
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Stakeholders
Anyone who affects or is affected by an organisationFreeman
Primary stakeholders - those without whom orgcannot survive
shareholders, customers, employees
Secondary community, environment, opinion formers
Clarkson
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Issues with stakeholders
Stakeholder scanning and identification
Stakeholder consultation
Stakeholder engagement
Approach depends on view of the organisation andthe need for a relationship with stakeholders
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Stakeholder Typology: One, Two, or ThreeAttributes Present (Mitchell, Agle & Wood)
POWER
LEGITIMACY
URGENCY
7
DefinitiveStakeholder
5
DangerousStakeholder
3
DemandingStakeholder
6
Dependent
Stakeholder
4
DominantStakeholder
1
DormantStakeholder
2
DiscretionaryStakeholder
8
Nonstakeholder
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The Management ofStakeholders
Four strategies
Reactive
Defensive
Accommodative Proactive
Wartick and Cochran (1985)
Depends on stage in life cycle
Fits idea of resource dependency
Jawahar and McLaughlin (2001)
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The Management of CSR
Medium term cost/ benefit
incremental social policies
operational issues
Recent substantial change
reactive
ethical/ environmental issues
protective - risk and reputation key
Strategic - long term viability and competitive advantage -two
forms
scenario mapping and strategic planning (top-down)
learning and innovation (bottom-up )
Lenssen 2001
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4%
4%
5%
7%
11%
17%
20%
Customers
Q Could you tell me, in your own words, what you think is
meant by the term corporate social responsibility?
Base: 2,099 GB adults, October 2000
Responsibility towards customers
Responsibility towards local
community
Responsibility towards theenvironment
Acting responsibility/ethically
Responsibility towards employees
Being profitable/successful
Responsibility towards theirshareholders
Source: MORI
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33%
49%
16%
2%
Q When forming an opinion about a particular company or
organisation, how important is it to you to know about theiractivities in society and the community?
Most say it is important to reputation
Base: 1,044 GB adults 16+ July - August 2003
Not very
important
Fairly important
Very important
Not at allimportant
No opinion 1%
2003
%
Important 82
Not important 18
Net +64
Source: MORI
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64%
60%
60%
58%
56%
51%
50%
Protecting the environment
Education
Recycling
Unemployment/re-trainingschemes
Help for people with disabilities
Job creation
Top mentions
-2
-5
+4
-1
-1
-2
0
Priority Activities
Base: 2,026 GB adults 16+ (350 customers)
Protection of the countryside
Q Which areas do you feel it is extremely or very important thatlarge companies contribute to or support?
Change02-03
+
Source: MORI
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Employees
Q Thinking now about the organisation that you work for, howimportant is it to you that your own employer is responsibleto society and the environment?
Base: 890 working GB adults 16+.
6%
33%
59%
VeryimportantFairly
important
No opinion 1%Not veryimportant
Not allimportant 1%
Source: MORI