Madinah Institute Webinar on CSR Practice & Implementation
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Presentation with additional materials as presented during the 22 April 2013 Medinah Institute for Leadership and Entrepreneurship webinar.
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Madinah Institute Webinar on CSR Practice & Implementation
- 1. Madinah Institute for Leadership & Entrepreneurship Webinar Series Corporate Social Responsibility Practice & Implementation William P. Kittredge, Ph.D. President Cervelet Management & Strategy Consulting www.cerveletconsulting.com www.cerveletconsulting.com
- 2. 2 Corporate Social Responsibility (CSR) 2www.cerveletconsulting.com
- 3. 3 CSR Creates Sustainable Development Sustainable development is a form of economic growth that recognises the importance of environmental and social objectives in long-term company financial performance and survival Contrast neoclassical economic theory & CSR critics Sustainability leads to the institutionalisation of Corporate Social Responsibility & Sustainability (CSR&S) 3www.cerveletconsulting.com
- 4. 4 CSR & S: Who Pays; Who Benefits? Old assumption – companies with CSR under perform Research suggests – organisations adopting CSR enjoy higher returns and corporate growth & sustainability "Corporate social responsibility is a hard-edged business decision. Not because it is a nice thing to do or because people are forcing us to do it... because it is good for our business" - Niall Fitzgerald Former CEO, Unilever 4
- 5. 5 Corporate Social Responsibility (CSR) Involves diverse partners Requires stakeholder identification & engagement Private sector generates responsible profits Society reaps the benefits of sustainable development. 5
- 6. 6 Evolution of CSR Compliance − Establishment of standards − Certifications Triple Bottom Line (TBL) Reporting − “making a business case” for CSR (see references) − Social, environmental, & financial impacts Responsible Competitiveness Market forces engaged to reward socially responsible companies 6
- 7. 7 Sustainability & CSR 7 Arts & Culture Employee Voluntarism EducationHealth Disaster Relief Community / Livelihood Development CSR Initiatives by Group Companies Environment CSR
- 8. 8 Corporate Social Responsibility (CSR) Implementation in line with organisational vision, mission, and goals – strategic plan implementation CSR - a comprehensive framework developed and adopted by the organisation No generic framework fits all situations Role of public regulatory bodies & NGO Transparency and credibility of CSR claims 8
- 9. 9 Ensuring Real Sustainability Build a business case for CSR - not merely a normative case Identify and distinguish sustainability and green-washing Commitment to transparency (e.g. TBL reporting) Commitment to multi-dimensional measurement & reporting 9
- 11. 11 CSR Lifecycle Creates Sustainability Initiation Implementation Organisational growth CSR process repetition CSR goal update Updated CSR implementation 11
- 13. 13 How to respond? Do something, make a start Set and realize realistic CSR goals − Company resources − Business lines Acknowledge that this is an iterative process, not an end point. Companies, and those who own and manage them, have more power than the average citizen; therefore more responsibility to act appropriately 13
- 14. 14 How to respond? Select a CSR model that is relevant to your business, and its social, political, and cultural environment. Remember you are changing corporate culture Secure active commitment of senior management. Make use of the 'workbooks' and 'toolkits' that are available – step-by-step guides streamline the process, making results easier to achieve. Train key personnel – use 'train the trainers' model Don't be afraid 14
- 15. 15 Responsible Business Framework 15 It is up to the individual company, perhaps working with their consultants, to determine: Which to address In what order of priority Appropriate metrics and measures for their business and context
- 16. 16 Responsible Business Framework (RBI see references) Perception The company reflects on its own values and understands how these values relate to its business goals. All businesses exist to make a profit; the company's values determine ethical reference points for business decisions.
- 17. 17 Responsible Business Framework Preparation Implementing values as policies and procedures, training company personnel, creating reporting & communication systems for stakeholders. Difficult process, especially for informally organised small businesses. However, once formally promulgated, easier to integrate into day-to-day management.
- 18. 18 Responsible Business Framework Practice Senior management must lead by example, establish rewards and sanctions, ensure policies embodied in daily business practice. The company's culture reflects management's practice; you lead from the front. If the leaders do not follow the rules, the employees will follow their poor example rather than the written policies.
- 19. 19 Responsible Business Framework Performance Sustained responsible behaviour requires constant reinforcement to integrate CSR principles into daily practice; cultural change All company personnel share a clear set of values integrated into the company's business model and reflected in day-to-day decision- making.
- 20. 20 Core Values Business values, mission, & goals are the foundation of CSR Company claims of good behaviour, when not supported by evidence, may actually harm business prospects over the long term. “It takes 20 years to build a reputation and five minutes to ruin it.” - Warren Buffett
- 21. 21 Core Values A values statement may offer the best picture of the organisation’s philosophical grounding. The company and all of its employees must be seen to enact those values at all times. Demonstrate an understanding of ethical priorities, the intent act responsibly, and the willingness to act consistent with these principles
- 22. 22 Core Values It has become commonplace to see value statements in company reports & the websites of many businesses of all sizes. If few people within the company adhere to the stated values or treat them merely a public relations tool, the price of hypocrisy can be high.
- 23. 23 Core Values Conflicts have destroyed businesses, even large international companies. Arthur Anderson case study Taj case study
- 24. 24 Core Values A responsible company knows that principles mean nothing without implementation. The commitment to implementation is in the company policies and incentives provided to employees. Fiscal Integrity Managerial Integrity Product Integrity
- 25. 25 Fiscal Integrity The primary responsibility of a business is to remain profitable. You must be viable to be responsible. Your fiduciary responsibilities cannot be neglected. Yet a company can pursue financial success without imposing unnecessary costs on the environment or society
- 26. 26 Fiscal Integrity Clear, transparent accounting, consistent with international standards Regular professional audits Appropriate fiscal controls 'Don't lie to yourself' TBL implementation where and when feasible Appropriate social investments, e.g. Saudi Basic Industries Corporation (Sabic) "Clean up the Gulf Day"
- 27. 27 Managerial Integrity Company governance and management is the face of a company. It is the stakeholders' window into the organisation’s commitment to ethical and responsible behaviour
- 28. 28 Managerial Integrity A company's decisions are deeply entwined with its ethical values. These values are reflected in its public image, influencing how much business it can generate in the long-term When a company's declared values contradict its practices, catastrophic consequences may follow.
- 29. 29 Managerial Integrity Business leaders or managers engaged in guiding and decision-making assume responsibility for their actions. Accountability is most commonly manifested in the annual financial statement. When signed by the CEO, it implies personal responsibility from company decision-makers and their readiness to face the consequences of their business decisions.
- 30. 30 Managerial Integrity A responsible company needs a responsible management. Guarantee responsible governance and management through policies of transparency and accountability.
- 31. 31 Product Integrity A company's most visible impact is through its product or service. Hoover, Thermos, and Frigidaire are examples of product names that became synonymous with trusted companies. Highly successfully companies provide products or services that become symbols of responsible business in the market they serve.
- 32. 32 Product Integrity A responsible company makes strong, ethical commitments and delivers on what it promises. Implement transparent systems that allow product quality, production methods, and supply chains activities to be viewed by stakeholders.
- 33. 33 Stakeholder Engagement Stakeholder – a person or organisation that is effected by the company's actions or activities, directly or indirectly Key stakeholders are those for whom the company's actions or activities hold high salience Shareholder – a person or organisation with a financial interest or ownership interest in the company
- 34. 34 Stakeholder Engagement Regularly consulting key stakeholders & seeking their active involvement drives the success of a company's strategic approach through: Product feedback Perception of company Desirable social investments Consultation may take the form of surveys, focus groups, market research activities, or any scale appropriate activity.
- 35. 35 Stakeholder Engagement The need for this type of activity grows from what might be termed 'non-governmental social auditing'. In essence, this is the promulgation of regulatory requirements by trans-national entities that are 'enforced' via social media campaigns and other informal means These informal requirements may be formally adopted by national or international regulatory bodies.
- 36. 36 Stakeholder Engagement A responsible company must factor in the concerns, and potential concerns, of its stakeholders, and invest appropriately. Policies that allow for appropriate interaction with stakeholders provides the basis for achievement in this area.
- 37. 37 Transparency Transparency is critical to accountability. Transparency, which implies that owners or managers communicate decision rationale openly to stakeholders within and outside the company Transparency implies direct, open communication between decision-makers and key stakeholders.
- 38. 38 Transparency Adopting transparency in operational and reporting processes Social expectation shifts from ‘why do you report?’ to ‘why don’t you report meaningfully and understandably?’ Research indicates correlation between economic, social and environmental indicators 38
- 39. 39 Transparency Financial reporting is the most commonly understood form of compliance. More recently, corporate governance, environmental performance, and social investments reporting has been added. International regulations typically require disclosure of value, origin, and content, but increasingly address social responsibility, environmental safety, fair trade and security.
- 40. 40 Transparency Allowing a group of persons to conduct business without exposure to individual liability makes the incorporated company a most potent vehicle of economic activity Price: laws & informal requirements for companies to demonstrate financial transparency & prudence, and fiduciary trusteeship through disclosure mechanisms.
- 41. 41 Transparency Product certifications and labelling EU 'CE' standards International Organisation on Standardisation (ISO) standards And many more...some are listed in the Compliance Reporting Table A responsible company understands the importance of consistent compliance and demonstrates is by using clear, internationally recognised policies of disclosure that make improvement and consistency easier for the internal management and verifying compliance easier for all stakeholders.
- 42. 42 Seattle | Bangkok | Karachi | Islamabad www.cerveletconsulting.com From Sustainability to Sustainability… William P. Kittredge, Ph.D. President Cervelet | Management & Strategy Consulting wkittredge@cerveletconsulting.com (084) 717 7900
- 43. 43 References 4 P's based on RBI, Pakistan's formulation AA1000 standard, based on John Elkington's triple bottom line (3BL) reporting
Notas do Editor
- DIMENSIONS OF CSR ALL REQUIRED FOR SUSTAINABILITY SPECIFICS MUST BE CULTURALLY AND ORGANIZATIONALLY APPROPRIATE IF TO SUCCEED.
- EXTERNAL ENVIRONMENT – SOCIAL EXPECTATIONS – CONSTANTLY EVOLVING; HENCE THIS IS PROCESS, NOT END POINT
- Refer to Table 1
- REQUIRES COMMITMENT, NOT LIP SERVICE, OF OWNERS OR MOST SENIOR MANAGEMENT – BOARD OF DIRECTORS, PRESIDENT, CFO, ETC. WITHOUT THE ON-GOING COMMITMENT OF THESE LEADERS, CSR, OR ANY INITIATIVE, WILL FAIL BECAUSE YOUR SUBORDINATES FORCE YOU TO LEAD BY EXAMPLE. WHAT YOU DO MATTERS MUCH MORE THAN WHAT YOU SAY COMPANY PERSONNEL, SUPPLY CHAIN PARTNERS, OTHER STAKEHOLDERS ARE CONCERNED WITH DEEDS, NOT TALK THIS IS SIMPLY AN EXTENSION OF THE BUSINESS PRINCIPLE FOR YOUR PRODUCTS OR SERVICES
- INFORMALLY ORGANIZED EMPHASIS ON LEADING BY EXAMPLE NO PLACE TO 'HIDE' IN SMALL BUSINESS BUT TEND NOT TO HAVE FORMAL BUSINESS POLICY PROCESS
- UTAH TREASURER EXAMPLE
- A company must be clear about its values and articulate them in a way such that everyone associated with its business processes understands them without any confusion. And, these values must be distilled into policies and procedures that work reliably, equitably & without exception. Converting values into policy and practice is perhaps the most crucial milestone on the road to responsible business. It is also a process only decision-makers can lead. Formulating policies and procedures may require long hours of deliberation. Yet once done, a policy document becomes the touchstone for business decisions, and procedures throw up a shield against undue requests from influential members of society.
- Started by Arthur Andersen in 1913, the company was founded on a reputation of integrity and professional excellence, with its slogan being, 'Think Straight, Talk Straight'. By 2001, Andersen had grown to 85,000 employees worldwide, with annual revenues of almost a billion dollars. When the Enron and MCI-WorldCom scandals broke, with Andersen's name firmly linked to their accounting malpractices and to other well-publicized financial misadventures at Sunbeam Inc., Asia Paper and Pulp, and the Baptist Foundation. A decade later, even after the U.S. Supreme Court overturned an earlier conviction, Andersen finds itself shunned by the business community as a company that violated its own principles of integrity and paid the ultimate price.
- MCI-WorldCom illustrates this well. When it filed for bankruptcy in 2002 it was more than the biggest corporate collapse in U.S. history. It was an example of wayward governance propelled by greed, where an overtly religious CEO attended church while senior managers systematically abused the accounting system through fraudulent entries and loans, reflected losses as investments, and lied to investors in collusion with accountants and stock-market analysts. SEE ALSO ARTHUR ANDERSON & ENRON OR TAJ CASES
- This accountability is proportional to their level in an organisation Hence, the owner or CEO has the highest level of responsibility to ensure that the business is profitable, as well as guaranteeing that it is able to fulfil its obligations as expected by law, the market, or society, and that the company remains answerable to each. In the MCI-WorldCom case,owner Bernie Ebbers was sentenced to 25 years in prison, and his senior managers sentenced to five years each. As part of their corporate accountability mechanisms, a number of countries require companies to declare the financial benefits given to board members and senior management. Balance Privacy Concerns
- A recent example is that of Toyota, the world's leading car-maker, which ordered a recall of 4.3 million vehicles in response to an August 2009 fatal accident caused by a stuck accelerator pedal. Another 2.3 million vehicles were recalled in 2010. The recall included all but two of Toyota's major models. The company's president, Akio Toyoda, ordered extensive testing for all models, saying, “We are grasping for salvation...Toyota has become too big and distant from its customers,' conveying that the company was responsible for its product and that such faults were the result of it not listening closely to customers. The recall and repair costs for 6.6 million vehicles meant a loss of billions of dollars. However, Toyota correctly realised that the financial costs were insignificant when compared with the retention of 40 years of stakeholder goodwill Product integrity can build a business, but a loss of product integrity can drag a company down. The alternative would likely have been for follow Dow Corning into bankruptcy.
- As you can see, a stakeholder may or may not be a shareholder, while all shareholders are stakeholders. Stakeholders is the more general term. Used hereinafter to refer to KEY stakeholders!
- While managing a small (40,000 customers) electric utility, I engaged stakeholders via regular attendance by myself or senior staff at Chamber of Commerce, Rotary Club, and similar business oriented organisation meetings and their informal activities, such as charity golf tournaments. I also regularly (usually monthly) randomly selected individual customers from our database and invited them to attend a brief meeting over lunch or breakfast. The simple meals gave me the opportunity to speak directly with customers informally and keep my 'finger on the customers pulse'. For larger organisations, where the customer base is too diverse and/or too dispersed globally, other methods, such as online surveys, Facebook pages, and other social media can be effective engagement tools.
- Many use the therm 'social investment' to imply direct company funding for various activities. However, some the most robust and lasting social investments require little or no funding. As manager of a small local electric utility, I provided bucket truck rides to children at local farmer's markets and fairs. The only 'cost' was the salaries of the electric workers I already had employed. As an additional benefit, employee morale was improved. In my business consulting role in the US, SME clients often asked 'how big a check' they should write to a given charity. I pointed out that giving to everyone who asks isn't the answer. In the case of Alliance Bank, a small regional bank building its home mortgage and business loan portfolio, I suggested that staff volunteers take company time to work building homes with Habitat for Humanity, wearing Alliance Bank logo shirts. The Bank's employees were very enthusiastic and the program built several homes for low income people. Alliance Bank employee morale improved, their reputation as 'socially responsible' spread through the home mortgage market, and, while on the job sites, several of the business bankers met contractors and other business people, establishing relationships with them that resulted in business loan activity.
- such as employees, shareholders, and consumers. The annual general meeting of shareholders is a regulatory instrument to implement transparency and accountability. Other common ways are through websites, company newsletters and media messages, and increasingly advertising. Taken together, these two concepts manifest a measure of a company's governance and management
- In addition, for businesses dealing with overseas clients, there are international regulations, particularly within the European Union and the United States, that typically require disclosure of value, origin, and content, but are increasingly seen to address social responsibility, environmental safety, and even fair trade and security. These aspects, like financial accounting, frequently require the establishment of a compliance system within a company that tracks the entire organisation’s operations for specific compliance data at the process level and generates information that can be reported under law. Such a system is often used by companies to safeguard their internal processes against fraud or misappropriation by employees or managers and to optimise business profitability by avoiding breach of law and its costly consequences.
- Another commonplace form of compliance is product labelling. Laws in various countries require that all products sold within that country or exported display information on content, origin, and use. The most commonly regulated products, with respect to claims against unfair or deceptive practices, are food or dietary supplements, medicines and drugs, cosmetics, and consumer equipment and devices. In addition to product content or composition labelling, the law in a number of countries requires safety or care labels on products, particularly textiles, toys, and electronics. Compliance codes in the United States and Europe are increasingly demanding disclosures on social and environmental responsibility, such as statements of natural resource use or child labour, and energy ratings, under laws such as Section 137 of the U.S. Energy Policy Act.
- Another commonplace form of compliance is product labelling. Laws in various countries require that all products sold within that country or exported display information on content, origin, and use. The most commonly regulated products, with respect to claims against unfair or deceptive practices, are food or dietary supplements, medicines and drugs, cosmetics, and consumer equipment and devices. In addition to product content or composition labelling, the law in a number of countries requires safety or care labels on products, particularly textiles, toys, and electronics. Compliance codes in the United States and Europe are increasingly demanding disclosures on social and environmental responsibility, such as statements of natural resource use or child labour, and energy ratings, under laws such as Section 137 of the U.S. Energy Policy Act.