AN INTRODUCTION TO CORPORATE RESPONSIBILITY AIESEC EuroXPro 2006 Prague 21 March 2006 George Starche

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AN INTRODUCTION TO CORPORATE
RESPONSIBILITYAIESEC EuroXPro 2006 Prague
21 March 2006George Starcher, President,
European Bahai Business Forum

• AN INTRODUCTION TO
• CORPORATE RESPONSIBILITY
• Prepared for EuroXPro 2006

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PURPOSE of this session . . . to further
your understanding of corporate responsibility
(CR) and to apply some of the basic concepts
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STRUCTURE OF THIS PRESENTATION

• 1. What is Corporate Responsibility (CR)?
• 2. The shareholder vs stakeholder concepts
• 3. How do companies put this concept into
  practice?
• 4. What motivates companies to engage in CR?
• 5. The business case for CR.
• 6. SMEs are different.
• 7. Applying the concepts What can I, We (NCs),
  They (AI) do to deepen our understanding of CR?

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1. WHAT IS CORPORATE RESPONSIBILITY?

• Definition 1 European Commission
• a concept whereby companies integrate social and
  environmental concerns in their business
  operations and in their interaction with their
  stakeholders on a voluntary basis

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1. WHAT IS CORPORATE RESPONSIBILITY?

• Definition 1 European Commission
• a concept whereby companies integrate social and
  environmental concerns in their business
  operations and in their interaction with their
  stakeholders on a voluntary basis
• Definition 2 World Business Council for
  Sustainable Development
• 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 of the
  local community and society at large.

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2. STAKEHOLDER MANAGEMENT

• Stakeholders are those parties impacted by the
  corporation and upon whom its ultimate success
  depends.
• Who are the major stakeholders in addition to
  investors?
• Employees (managers, employees, families,
  retirees)
• Customers (direct and indirect)
• Business partners (suppliers, joint ventures,
  alliances)
• Communities (regional, national, local)
• Environment

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Enterprise eco system The stakeholder concept
Enterprise
Enterprise
Partners
Customers
Enterprise
Employees
Suppliers
Environment
Communities
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3. HOW DO COMPANIES PRACTICE CSR?

• First, several generalizations
• CR is fundamentally a vision or philosophy about
  the purpose
• and role of business in society.
• Practices vary by company, CEO, culture, and
  tradition.
• CR is a journey and a process of continuous
  improvement.
• CR is an investment in building an image and
  reputation.
• CR makes good business sense.

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Employees / Workplace

• q Quality of Life

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Employees / Workplace

• Quality of life
• Human resource policies
• Responsible restructuring
• Human rights
• Diversity
• Job creation
• Training and education
• Health and wellness
• Harassment

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Customers/consumers

• Ethical marketing
• Products and Services
• Customer service
• Responsible procurement
• Audits
• Cause related marketing

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Suppliers

• Codes of conduct
• Supply chain management and monitoring
• Human rights
• Labour standards (ILO)
• Minority Vending
• Fair Trade

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Community Involvement

• Volunteerism
• Education
• Poverty alleviation
• Philanthropy

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Environment

• Life-cycle management
• Greening the supply chain
• Pollution
• Public procurement
• Eco-Efficiency (recycling, consumption, ..)

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Related issue areas
Business Ethics Codes of conduct Ethical
audits and training Governance Mission/vision/v
alues Corporate culture Internalizing
costs Regulation Government Civil
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WHAT DRIVES ETHICAL DECISIONS ?
REGULATION
ETHICAL
ECONOMIC
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4. WHAT MOTIVATES COMPANIES TO BE RESPONSIBLE?

• Business success and competitiveness
• Competitive advantage (ex Cooperative Bank UK)
• Ethical reasons doing the right thing
• Fad, peer group pressure
• License to operate
• Social purpose/mission

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Examples
Wal-Mart increase fuel efficiency of trucks by
25 over 3 years (eco-efficiency) Wal-Mart
audit supplier factories and reward them for
environmental goals and cut emissions
(responsible procurement) Danone closing
factory in Mexico without layoffs or job loss
(responsible restructuring) Starbucks UK
employees volunteering on Christmas Day to
support local homeless shelter raising money
for local causes (community involvement)
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5. THE BUSINESS CASE FOR CR

• Hundreds of studies and articles indicate a
  correlation between good social and environmental
  practices and financial results, e.g.
• ? CR vs share price performance
• ? Good HR practices vs ROI
• ? Low pollution vs PE ratios
• ? Quality vs market share
• ? Community involvement vs employee motivation

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5. THE BUSINESS CASE FOR CR

• Hundreds of studies and articles indicate a
  correlation between good social and environmental
  practices and financial results, e.g.
• ? CR vs share price performance
• ? Good HR practices vs ROI
• ? Low pollution vs PE ratios
• ? Quality vs market share
• ? Community involvement vs employee motivation
• . . . but clear proof of cause and effect
  remains elusive.

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5. SMEs ARE DIFFERENT

• CSR is meaningless to SME owner/managers
• The word corporate turns them off.
• as does social responsibility to entrepreneurs
  preoccupied with their own survival and cash flow.

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Yet five major drivers lead entrepreneurs to act
responsibly

• The values of the owner/manager
• Cost savings (ex eco-efficiency)
• Supply chain/customer requirements
• Potential to increase revenue
• Attraction, retention and motivation of employees

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6. LOOKING AHEAD

• CR will become more common practice.
• Public expectations of business will increase as
  the government role continues to diminish.
• There will be increasing demands for more
  transparency dont tell me, show me.
• Audits and annual social reports will become
  common, even mandatory in some countries
• CR will become a more strategic concern for
  management and be decentralized to business units
• New scandals involving business and government
  officials will focus increased attention on
  business ethics.

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• New models will emerge for allocation of costs
  and benefits among companies, customers, and
  society.
• Raw material shortages and environmental
  degradation will limit growth and job creation.
• Treatment of employees will become even more
  important to win the war for talent.
• Business will seek more partnerships with
  government and NGOs to address major issues.

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Sustainability

• 1987 Brundtland Commission the ability to meet
  todays global economic, environmental and social
  needs without compromising the opportunity for
  future generations to meet theirs.
• Dow Jones Sustainability Group Indes (DJSGI) a
  business approach to creating long-term
  shareholder value by embracing opportunities and
  risks deriving from economic, environmental and
  social developments.
• Michael Hopkins Sustainable development means
  improving the quality of human life while living
  within the carrying capacity of supporting
  ecosystems.