Business and Society: Corporate Social Responsibility

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Business and SocietyCorporate Social
Responsibility

• Professor Alexander Settles
• Faculty of Management, State University Higher
  School of Economics

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What is Corporate (Social) Responsibility (CSR)?

• Definitions and Terms
• Corporate social performance
• Corporate social responsibility
• Social Capital
• Corporate responsibility
• Business Ethics
• Socially responsible investing Business Ethics
• Human Capital
• Corporate Citizenship
• Corporate Accountability
• Sustainability
• Sustainable Development

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What is Corporate Social Responsibility (CR)?

• Internal
• Business Ethics
• Human resource / personnel management
• Labor standards of suppliers
• External
• Social local and global
• Environmental

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Responsibilities of Business
Economic (must do)
Legal (have to do)
Ethical (Should Do)
Discretionary (Might Do)
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Milton Friedmans Traditional View of Business
Responsibility

• There is one and only on social responsibility
  of business to use its resources and engage in
  activities designed to increase profits so long
  as it stays within the rules of the game, which
  is to say, engages in open and free competition
  without deception or fraud. (1970)

Economic
Legal
Ethical
Ethical
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CSR Components

• Business Ethics Environment
• Rule of Law Anti-Corruption
• Labor Market Conditions
• Environmental Risks
• Social/Political Risks
• Corporate Governance Risks

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Frameworks - Triple Bottom Line

• (a) Economic bottom line. Although main emphasis
  is on financial performance, this often refers
  not only to profit but to the philosophies behind
  a company's strategy or behavior, the
  sustainability of its businesses and its 'human
  capital'.
• (b) Environmental bottom line. The impact of its
  products or operations on the environment, plus
  the nature of its emissions and waste and how it
  is dealing with them.
• (c) Social bottom line. How it approaches issues
  such as ethnic and gender diversity, working
  hours and wages, staff security and its
  contribution to community services or facilities.

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WBI Framework
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WBI CR as an Integrated Approach

• A comprehensive set of policies, practices and
  programs
• Integrated into business operations, supply
  chains, decision making processes
• Includes responsibility for current and past
  actions as well as future impacts
• Issues vary by company size, sector, and location

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UN Approach Global Compact

• Human Rights
• Principle 1 Businesses should support and
  respect the protection of internationally
  proclaimed human rights and
• Principle 2 make sure that they are not
  complicit in human rights abuses.
• Labour Standards
• Principle 3 Businesses should uphold the freedom
  of association and the effective recognition of
  the right to collective bargaining
• Principle 4 the elimination of all forms of
  forced and compulsory labour
• Principle 5 the effective abolition of child
  labour and
• Principle 6 the elimination of discrimination in
  respect of employment and occupation.

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UN Global Compact

• Environment
• Principle 7 Businesses should support a
  precautionary approach to environmental
  challenges
• Principle 8 undertake initiatives to promote
  greater environmental responsibility and
• Principle 9 encourage the development and
  diffusion of environmentally friendly
  technologies
• Anti-Corruption
• Principle 10 Businesses should work against all
  forms of corruption, including extortion and
  bribery.

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Russian Firms in the Global Compact Joined

• Analytmarketing Joint Stock Company, 2001/06/21
• Intersputnik International Organisation of Space,
  Communications Technology Hardware Electrical
  Equipment, 2003/01/03
• Iteren, Professional, Scientific and Technical
  Services, 2004/05/11
• Joint Stock Company Foreign Trade Association,
  2002/03/22
• JSC "Murmanelectrosviaz", Telecommunication,
  2002/06/27
• JSC ALTEN, Construction Materials 2005/06/21
• Kirov State Air Enterprise, Aerospace Aviation
  2002/03/22
• Moscow City Telephone Network, Telecommunication
  2002/06/27
• MTK Companies Group, Telecommunication
  2002/06/27
• Murmanelectroviaz Telecommunication 2002/06/27
• Nefteyugansk United Airline Transportation
  Company, Aerospace Aviation 2002/03/22
• Russian Aluminium Joint Stock Company, Metals
  Mining 2002/03/27
• Sistema JSFC 2002/08/31
• Svyazinvest JSC, Telecommunication 2002/06/27

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Russian Firms in the Global Compact Joined and
submitted COP

• CJSC ARM Group Enterprises, Utilities 2004/05/26
  
• Interros, Finance Insurance 2001/10/22
• Volga-Dnepr Airlines, Aerospace Aviation
  2000/11/14
• Yukos Oil, Oil Gas 2001/08/15

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US Corporate Responsibility

• CSR / Corporate Social Performance has existed in
  some form for more than 25 years in the U.S.
• Sources of CSR/CSP
• Environmental regulation
• Foreign Corrupt Practices outlawed
• Development of Socially Responsible Investment
  community
• Institutional investors place pressure on
  corporations
• Employee retention and development are crucial
  for success

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Corporate Citizenship US approach

• Good corporate citizenship
• Provision for a safe and healthy workplace
• Exemplary employment practices
• Responsible environment protection and practices
  
• Contribution to the overall growth and
  development of the local economy
• Implementation of activities that are compatible
  with local science and technology policies
• Compliance with international, and local laws,
  focusing on anti-corruption, anti-bribery and
  transparency.

Source US Department of State
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US CSR Activities

• Business organizations
• The Business Council
• Business Roundtable
• The Conference Board
• Investment screening
• Investor Responsibility Research Center
• Dow Jones Sustainability Indexes

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Russian Approach

• RSPP Social Charter
• Economic and financial stability (pay taxes)
• Quality of production (customers)
• Labor Relations
• Human rights
• Protect the environment
• Form local associations to work with local
  stakeholders and government

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Russian Approach

• Measuring
• UNDP Russian Association of Managers Report
  About the social investments in Russia in 2004
• AMRs Business and the social development of
  Russia problems and prospects 2006
• Reporting
• Accountability
• Global Reporting Initiative (GRI)

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Examples of Russian Reports

• Alfa Bank
• British American Tobacco Russia
• JSC Gazprom
• JSC Lukoil Oil Company
• McDonald's Russia
• North-West Timber Company
• OJSC MMC Norilsk Nickel
• RAO UES
• RUSAL
• Sibneft (Gazprom Neft)
• YUKOS Oil Company PC

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Corporate Responsibility as Firm Strategy Examples

• Environmental concerns or fair trade concerns
  allow for companies to charge premium prices
  Ben Jerrys Homemade Inc. and The Body Shop
• Trustworthiness may generate enduring
  relationships with suppliers - Maytag

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Corporate Responsibility as Firm Strategy Examples

• Firms can attract outstanding employees that
  desire to work for a responsible firm Procter
  Gamble
• They are more likely to attract capital infusions
  from investors who view reputable companies as
  desirable long-term investments - Rubbermaid

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CSR and Risk Management

• Protecting and enhancing reputation, brand equity
  and trust
• Attracting, motivating and retaining talent
• Managing and mitigating risk
• Improving operational and cost efficiency
• Ensuring license to operate
• Developing new business opportunities new
  products and services, new markets, new
  alliances, new business models
• Creating a more secure and prosperous operating
  environment

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Sources of Social Risk
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Social Risk Equation
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Social Risk as Managed Strategic Risk
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Evolution of Social Risks
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Reputation, Corporate Responsibility, and
Competitiveness

• Does a socially responsible commitment by
  corporations improve the business climate?
• What are the results from the US and other
  western countries?
• The CCG has played a role in exposing the
  academic community to Corporate Governance
  practices and CSR issues

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Corporate Social Reporting Some of the Standards

• Global Reporting Initiative
• AA1000 AA1000SES AccountAbility
• SA8000 SAI
• Business process standards
• ISO 9000 "quality management
• ISO 14000 "environmental management
• IAASBs International Standard on Assurance
  Engagements
• ISO 26000 corporate social responsibility
  published by 2008

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Stakeholder Engagement Model
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Engagement Questions for the Firm

• What is the issue or problem?
• How complex is it?
• What is its scope?
• Who else has an interest in the problem?
• What is working and not working in the current
  approach?
• What would be accomplished by engaging others in
  the dialogue?

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Reporting Concepts

• Determine information requirements for early
  sensing and reporting
• Establish reporting protocols
• Reporting chain
• Reporting frequency (e.g., urgent vs. routine)
• Reporting templates
• Create metrics that support
• Measurement and assessment of risk impact
• Aggregation and prioritization (including common
  taxonomy)
• Meaningful and contextualized understanding of
  material risks
• Develop protocols for early warning indicators
  for immediate reporting/action
• Identify internal and external information
  sources
• Define reporting tools

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Reporting Standards

• Stakeholder Involvement
• Subject Area
• Environmental
• Labor
• Transparency and Ethics
• Industry Area
• Forestry
• Mining
• Oil and Gas
• Telecommunications
• Hospitality

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Sustainability Reports

• Understanding of a companys economic, social,
  and environmental position
• What kind of company are we?
• What are the key issues for long term financial
  growth and sustainability?
• What are the pressures on the company?
• How should the company be positioned?

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Sustainability Reporting

• Risks to the company Defining the scope
• What are the risks?
• Who is evaluating the risks?
• How often?
• Proactive versus Reactive
• Setting policies
• Who sets the policies? What is the Board of
  Directors involvement?
• Involving the company
• Involving stakeholders

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Sustainability Reporting

• Who is the audience?
• Employees
• Government
• Public
• Investors
• Stakeholders
• What will be disclosed?
• Operational Issues
• Information gathering and control systems
• Standard operating procedures
• Internal reporting
• Assurance

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