Review Analysis & Summary report (H-CSR-Model)

Review Analysis

&

Summary of

H-CSR-Model

Signature Document by Muddasir

Presented By:

Muhammad Muddasir

Chartered Accountancy Profession

CSR Project Framework Designer

Dr. Michael Hopkins is CEO of MHC International Ltd and CSRFI who has introduced the model to establish the measurement criteria and desired action with reporting matters for the CSR activities initiated by the companies.

In collaboration with Dr. Michael Hopkins, Mr. Muhammad Muddasir is engaged in presenting the Independent review analysis of this model with summarizing its theme as well for corporate sector.

Contents of this report:

O b je c ti v e o f R e p o r t 2

S c o p e o f R e p o r t 3

G lo b a l S t a n d a r d s 4

R e v ie w A n a ly s is 5

S u m m a r y o f H - C S R - M o d e l 7

C o n c lu s io n 1 8

2016Review Analysis & Summary of H-CSR-Model

Page 1Muhammad Muddasir

Objective of Report

This report is aiming to provide an independent analysis about H-CSR-model including the view point of other reporting framework to all companies encircled within the scope of CSR activities under the fair presentation of financial and non-financial reporting in the company’s financial statements.

It will provide the basic understanding about the scope of CSR activities and define the responsibilities and role of management in term of socially and ethically by an opting any CSR reporting framework to disclose all financial and non-financial matter to all the concerned stakeholders in the public interest.

It helps the companies to design or modify the exiting reporting framework by defining Key parameters for measuring the ultimate objectives of CSR to be achieved based on the H-CSR-model.

It enables the regulatory authorities of any country to identify and evaluate all the activities which are being initiated by the companies within or outside the country in the name of CSR to raise its goodwill also in the public regime or against the competitors whether it actually falls under the scope of CSR.



Scope of Report

This report covers the independent analysis with conclusion subject to H-CSR-model has been presented while it encircles to all the companies from private to the public sector including such as NGOs or any other organization based on trust or welfare.

This report highlights the key components of H-CSR-model which must be present in the organization as the supporting pillars for CSR but it also provides the reasonable margin to make it modified in accordance with the need of company.

It also defines and enlists the CSR classification with its related possible activities which vary from one company to other company in accordance with nature and extend of scope of business.

This report covers the basic features of global reporting frameworks to be implemented by the MNCs in the different regions.



Global Standards

There are the different standards are being introduced and adopted in the global corporate world and different corporations have been associated with the different standards. The most applicable standard is GRI (G4 reporting) while others including IRI and etc.

In this situation, role of MNCs become more than its own ambit of ordinary course of business activities because they are deemed to be the role model for the private, Govt. based entities and other NGOs. But unfortunately, most of the MNCs are carrying its own (un-registered) reporting format which is caused for appearing the consistency and transparency problems.

In this regard, Global CSR and Sustainability Development forums should design standardized reporting format under the classification of nature of CSR business / Sustainability development activities initiated by any company including MNCs.

By adopting the methodology would enable the companies to create the harmony and consistency in the reporting pattern for the disclosure of information about CSR and Sustainable development business to all the stakeholders and regulatory bodies.

Standardized reporting format should have the features of disclosing the quantitative and qualitative information for all the key stakeholders and the general public in order to create the consistency and upholding the transparency matter.

Quantitative feature must highlight the quarterly and annual finance budget with two years projection under the consideration of inflation and tax factors. Similarly, it should also disclose the percentage of the funds to be invested in the different securities out of the available contribution in the form of financing made by the stakeholders.

Qualitative feature must be in the report to reflect the achievement of the social targets to determine the at what extend of benefits to be transferred to the targeted part of society based on the CSR and Sustainable Development business activities.



Review Analysis

Hopkins’ CSR model is based on the four areas to establish the basis for the measurement of achieving the targets and the criteria for the performance analysis in order to redefining the social corporate goals which have been set by the organizations.

It covers the four areas in the following order,

1. CSR – Definition2. Principle, Process & Product (3Ps)3. Measurement KPI4. CSR Strategy

CSR – Definition:

The definition is defined by Hopkins covers the ethical responsibility of the key stakeholders associating with any institution or corporation to participate in the economic and sustainable development activities while whatever the profit is earned during the said activities in such a manner which must be acceptable under the international norms of ethics.

It has been emphasized the living standard of people in the society but not focusing the development of sense of maturity of ethical and moral responsibility of general public to alive the soul of CSR in the true meaning. Whether the general public is willing to accept or bring the positive change or to promote such trend in the society while how to create such positive mindset environment in the society by corporate sector.

Principle, Process & Product (3Ps):

Hopkins refers to the elementary obligations of the corporations is to develop the relationship between the society and business in order to engage them, creating the social and moral pressure on management of organization to take the responsibility of the outcome in the scope of principle. In addition to this, it is highlighted the matter of managerial skills and organizational policies to respond the social pressure and handling the ever changing environment due to the multiple factors in the scope of process.



Further, it also covers that at what extend of the corporate code of ethics affecting the decision making of the socially responsible and the ultimate impact of product ether positive or negative on public in the individual capacity or environment as a whole. But in this process, it has not been mentioned, on what basis of corporate code of ethic must be designed (i.e. pre-conditions of code) to cover the risk has been associated with elements (3-Ps) for achieving the target.

Measurement KPI:

H-CSR model has defined the indicators under the three layers classification such as principle, process and outcome to measure the performance. Measurement of performance is based on the qualitative and quantitative features.

It includes the publication and distribution of code of ethics to the internal and external stakeholders under the super visionary independent body while in case of non-compliance reasonable of amount of fine must be charged on the prudent basis.

Further, at what extend of R&D expenses are being incurred on the different stages resulted in the net number of jobs are created, employees and management training is to increase the level efficiency for achieving the desired outcomes, share value i.e. returned on the investment (Financial).

In addition to this, performance shall also be measured on the basis of the industry standards practiced specifically to the non-compliance of the environmental matters. In the process of measurement as defined by Hopkins, one thing must be highly concerned about how to ensure the controls are applied either by regulatory authority or company itself whether they are enough satisfactory and relevant to the contemporary social, economically and technological aspects in order to reflect the true and faire measurement of KPI.

CSR Strategy:

In this model, Hopkins covers only the matter of synchronization of CSR and organizational goals with respect to their strategies but not focusing the matter of conflict and how to resolve without disturbing the objective and execution of CSR work.

CSR strategy must be aligned with the organizational goals (financial and non-financial) in order to make the contemporary with the ever changing the technological and business circumstances as well. Focus that whether the socio economic requirement of the beneficiaries & transparent reporting requirement to the corporate stakeholders including the general public are fulfilled.



For any conflict to be raised due to nature and extent of reporting about the CSR in the Annual Financial Statement, Company shall need to consult with UN Global Compact, GRI, MHC or holding company if i t is the member of any one of them to ensure the consistency and transparency at all levels.

Estimating the quarterly and annual budget for CSR Projects subject to the established criteria (with the mutual consent of all the concerned stakeholders such as BOD and CSR committees) for each quarterly contribution of fund based on the expected outcome.

Summary of H- CSR - Model

Key Notes of Hopkins CSR Model

It covers the following important areas

CSR Definition Principle, Process, Product (3-Ps) Measurement KPI CSR Strategy



Concept of CSR:CSR is the system model to look at the social responsibilities of all the key stakeholders or components of the corporate sector being associated as the Private or Public organizations. Operations of such class of companies should be profit oriented to transfer the benefit of certain percentage of profit to the less economically decorated part of society.

Definition - Corporate social responsibility (CSR):It is a process that is concerned with treating the stakeholders of a company or institution ethically and in a responsible manner. Key stakeholders must be treated in a manner deemed acceptable according to international norms.

a) Social responsibility includes the economic and environmental responsibilities to the stakeholders

exist both inside and outside a firm or institution.

b) The ultimate aim of corporate social responsibility is to create higher and higher standards of the sustainable living, while preserving the profitability of the corporation or integrity of institution, for peoples both within and outside these entities. The key is that how profits are made, not the pursuit of profits at any cost.

c) CSR and sustainability are closely linked in that they both having aim to achieve the sustainability

development in the societies. Both CSR and sustainability address to the multi-stakeholders and their materiality.

Principle, Process & Product (3 – P Model):The basic elements of the model are threefold are as following,

Principles of social responsibility Processes of social responsiveness Products (or outcomes) of social responsibility

Level – I: Principles of Social Responsibility;

Application of this principle is institutional and is also based on the firm’s basic obligations as a business organization. Its value is that it defines the institutional relationship between business and society and specifies what is expected of any business.



1. Legitimacy:

It concerns business as a social institution and frames the analytical view of the interrelationship of business and society.

2. Public responsibility:

This element concerns the individual firm and its processes and outcomes within the framework of its own principles in terms of what it actually does.

3. Managerial discretion:

Managers and other organizational members are the moral actors. Within every domain of CSR, they are obliged to exercise such discretion as is available to them, toward socially responsible outcomes.

Level – II: Process of Social Responsibility;

Corporate social responsiveness is business’s capacity to respond to social pressures. It suggests the ability of a business organization to survive through its adaptation to its environment. Firm must know as much as possible about this environment, be capable of analyzing its data, and must also react to the results of this analysis. But the environment of business is not static; it is a complex and ever changing set of circumstances, encompassing complicated interpenetrations of social systems.

Principle of Social Responsibility

Legitimacy Public Responsibility Managerial Discretion



1. Environmental scanning:

Such assessment indicates the informational gathering arms of the business and transmission of the gathered information throughout the organization with its ultimate use in forward planning.

2. Stakeholder management:

It refers to mapping the relationships of stakeholders to the firm (among each other), seeking to balance and meet legitimate concerns as a prerequisite of any measurement process. Stakeholder is defined as any group or individual who can affect or is affected by achievement of the firm’s objectives.

3. Issues management.

The area of issues analysis and management concerns those policies to be developed to address social issues. Having identified the motivating principles of firm and having determined identities, relationships and power of stakeholders, the researcher now turns to the issues which concern to stakeholders.

Level – III: Product (Outcomes);

The programs and behavioral outcomes of the motivating principles can only be significant if they are measured in terms of the stakeholders that they affect. To determine whether CSP makes a difference, all of the stakeholders relevant to an issue or complex of issues must be included in any assessment of performance.

Process of Social Responsibility

Environmental Scanning Stakeholder Management Issues Management



1. Internal stakeholder effects:

This element is concerned with stakeholders within the firm. This might be used to examine how corporate code of ethics affects the day-to-day decision making of firm with reference to social responsibility. Similarly, it might be concerned with the positive or negative effects of corporate hiring and employee benefits practices.

2. External stakeholder effects:

This element examines the impact of corporate actions on the persons or groups outside by the firm. This might concern that such things as the negative effects of a product recall, the positive effects of community related corporate philanthropy, or assuming the natural environment as a stakeholder and the effects of toxic waste disposal.

3. External institutional effects:

Final element of this model would also examine the effects on the larger institution of business rather than on any particular stakeholder group and several environmental disasters made the public awareness of the effect of business decisions on the general public for example. This new awareness brought about pressure for environmental regulation, which then affected the entire institution of business rather than one specific firm.

Product

Internal Stakeholder effects

External Stakeholder Effects

External Institutional Effects



Key Performance Indicators:Under this model, indicators to measure the CSR profile is based on the three layers and nine essential elements are given as below,

a) Categorizing the said three layers.1) Principles of Social Responsibility2) Process of Social Responsibility3) Outcome of Social Responsibility

b) Categorizing the elements1) Legitimacy2) Public Responsibility Principles of social responsibility3) Managerial Discretion4) Environmental Scanning5) Stakeholder Management Process of social responsibility6) Issue Management7) Element of SRE model8) Internal Stakeholder Effect Outcome of social responsibility9) External Stakeholder Effect10) External Institutional Effect



Work flow understanding – Principle of Social Responsibility:

Work flow understanding – Processes of Social Responsibility:

LegitimacyPublic ResponsibilityManagerial Discretion

Elements

Code of Ethics (In General)Litigation(Breach of Law)Fine resulting from illegal activitiesContribution to innovationJob CreationCode of Ethic (Specific)Managers convicted in the illegal activities .

Indicators

Published, Distributed to employees & Monitoring from the Independent group.AmountAmountR&D ExpenditureNumber of net job createdManagers & Employees trainedNumber & Amount.Measures

Environmental ScanningStakeholder ManagementIssue Management

Elements

Mechanism to review social issues relevent to firmAnalytical body for social issue(integral part of policy making)Social AuditEthical Accounting StatementPolicies made on basis of analysis of social issues

Indicators

ExistenceExistenceExistenceExistanceFirms regulation & policies

Measures



Work flow understanding – Outcome of Social Responsibility:

For Stakeholder Groups - Owners

For Stakeholder Groups – Managers

Internal Stakeholder Effects

Element of SRE Model

Profitability/ValueCorporate irresponsibility or illegal activityCommunity welfareCorporate Philanthropy Code of Ethics

IndicatorsShare value / Returned on InvestmentFine/ Number of product recalls/ pollution performance measured against industry standards.Amount of giving / Programmes as % of earningsAmount of pre-tax giving as % of earning.Published , Distributed , Trained

Measures

Internal Stakeholders Effects


Code of Ethics

Indicators

Trained in code of ethics & apply in demonstrable & measurable waysRank of manager responsible for applying code.

Measures



For Stakeholder Groups – Employees

For Stakeholder Groups – Customers/Consumers



Union / Staff relationsSafety IssuesPay , Pension & benefitsLay offEmployee ownershipWomen & minority ownership

Indicators Evidence of controversy, good relationsLitigation, finesRelative ranking to similar firms (measuring % spent on employee benefits, programmesPercentage,frequency,Individual chosenAmount by per percentExistence, rank with similar firm, litigation & fines.

Measures



Code of EthicsProduct recallsLitigationsPublic Product or Services controversyFalse advertising

Indicators

Evidence of application to product or services.Absolute number, seriouness demonstrated by litigations or fines, percentage of total production.Amount of fraud, price fixing , antitrust suits.

Measures



For Stakeholder Groups – Natural Environment

For Stakeholder Groups – Community



PollutionToxic wasteRecycling and use of recycledproductsUse of eco-label on products?

Indicators

Performance against index,litigation, finesPerformance against index,litigation, finesPercentagesYes/No?

Measures



Corporate giving to community programmesDirect involvement in community programmesCommunity controversy or litigation

Indicators

Amount,percentageNumber,outcomes, costs,benefitsNumber,seriousness, outcomes

Measures



For Stakeholder Groups – Supplier

For Stakeholder Groups – Business as Social Institution



Firm’s Code of EthicsSupplier’s Code of EthicsLitigation/finesPublic controversy

Indicators

Applied to all suppliersAppliedNumber, amount,outcomesAmount, outcome

Measures

External institutional Effects


Code of EthicsGeneric litigationClass action suitsPublic policy and legislation improved due to pressure from corporation

Indicators

Published and appliedAmounts, number,outcomesAmounts, type, number, outcomes Yes or NoMeasures



CSR Strategy:Initially, company needs to identify and revised the organizational goals in changing the business and technological environmental which must be aligned with the strategic objective of CSR program.

Company shall need to define the Value & Mission Statement of company to articulate in the culture of organization to the management to act accordingly. Subject to define the how long term vision of CSR is being aligned with business goals.

Company shall need to identify the beneficiaries and stakeholders to whom the report is made and also considering that what kind of CSR projects is being initiated by competitor and what reporting matter is being used within the industry.

For any conflict to be raised due to nature and extent of reporting about the CSR in the Annual Financial Statement, Company shall need to consult with UN Global Compact, GRI, MHC or holding company if i t is the member of any one of them to ensure the consistency and transparency at all levels.

Estimating the quarterly and annual budget for CSR Projects subject to the established criteria (with the mutual consent of all concerned stakeholders such as BOD & CSR committee) for quarterly contribution of fund based on the expected outcome. Budgets shall be designed for each project separately while, if any project is recurring nature so the revision of budget (Inc. /Dec. in contribution) subject to approval of board and prior outcomes with considering the any volatile or non-volatile contingencies.

Establish the key performance indicators to measure the progress of CSR work for achieving the desired outcome in respect of socio – economic development. Company shall also take the reasonable steps to ensure the effectiveness and appropriateness of KPI which must cover the measurable and practicable aspects including the Cost and Benefit relationship factor shall also be considered for each project.

Evaluating process shall be on going nature from beginning to the implementation stage subject to the cost and benefit relationship. Company shall be required to obtain the certificate from the concerned standard reporting framework Board (UN Global Compact, GRI or MHC).

Conclusion:

In my view point, there is no reason, to not recommending the H-CSR-Model for the adoption by the companies including from public to private sectors. I appreciate the remarkable efforts of Dr. Michael Hopkins to design the measurement model for the companies’ performance in the interest of al l the concerned stakeholders.



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Review Analysis & Summary report (H-CSR-Model)