CSR

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CSR

  1. 1. 10th February 2014 By Anthony Veluz
  2. 2. What is Corporate Social Responsibility (CSR)? Why does CSR exist?  “Corporate Social Responsibility encompasses the economic, legal, ethical, and philanthropic expectations placed on organisations by society at a given point in time.” (Carroll and Buchholtz 2002)  CSR raises questions about justice for current and future generations and it’s tasked with preventing immoral practices which can weaken society, damage companies and hurt employees. It’s arrived as a result of corporate failures resulting from immoral practices e.g. Enron  CSR is how companies earn their profits and not how they spend them.
  3. 3. Advantages of CSR  Innovation – e.g. Unilever  Cost Savings - e.g. General Mills  Brand Differentiation – e.g. BodyShop, Timberland  Customer Engagement – e.g. Walmart  Employee Engagement – If they get your message then they can spread the message effectively. e.g. Elephant Branded - Employees of integrity along with appropriate organisational structures are essential to realise CSR.  CSR makes great business sense!!!
  4. 4. Stakeholders companies need to consider  The Consumer – Consumer responsibility is on the rise. Consumers possess a significant amount of power and influence. e.g. Starbucks - tax avoidance in the UK BP – Deepwater Horizon disaster = blow to reputation, lost revenue, share prices fall  Government – The Department of Justice imposed a £4bn fine on BP over Deepwater Horizon, and charged and convicted a number of workers with manslaughter. Politics plays an important role, however, we must bear in mind, in a globalised world the effects of regulation can be difficult.  Suppliers, NGOs, local communities, employees are also important.
  5. 5. Human Rights and CSR  CSR – Companies are meant to operate in a positive way and adhere to laws and regulations, some of which relate to human rights. But are companies following the law? In many cases the answer will be no: e.g. Bangladesh factory fires, torture and murder of labour activists. Ikea – political prisoners used as forced labourers of suppliers.  Human rights is a major issue in CSR, especially in relation to the supply chain (remember CSR is how companies make their profits!)
  6. 6. CSR in annual reports  20-25 years ago, annual reports would have contained nothing but purely financial data. But things have started to change.  Over the years a corporate social responsibility report has started to be developed by many companies. Many companies now put in quite a lot of data affecting society, i.e. employee turnover, the number of cases within the company where it was found that child labour was being used, the number of injuries maintained by staff, customer satisfaction levels, and also the records of the environment i.e. pollution and carbon footprint.
  7. 7.  At the moment we have the financial data in one part of the annual report and then we have the social and environmental in another part. This is often referred to as ‘triple bottom line’. We’ve got financial figures, social figures, and environmental figures – three lots of data – three bottom lines. A financial profit, a social profit or loss, and an environmental profit or loss. While it’s helpful that all three areas are reported, there is a concern that whilst you keep them separate, most people’s focus will stick with profit. So maybe there is another way of handling this where somehow we can combine all of the stuff together into one set of numbers.
  8. 8. A liability to society  Maybe what we need is a new type of liability – a liability to society. This would be a provision to show the amount of damage a company has caused over time which can be argued that the company sort of owes back.. If the company starts building this liability up on their balance sheet, the next step would be at some point someone has to come to them and demand that they pay this money maybe to the government so that the government can spend it on clearing up their environmental mess. Now fairly clearly this is a controversial way forward but there are already examples of this being done. There are some products in your kitchen which are potentially dangerous to the environment i.e. fridges and freezers. If you’ve got an old fridge and you want to get rid of it because you have a new fridge coming, you cannot simply go a dump this fridge somewhere. Nowadays they have to be properly gotten rid of in order to minimize the damage to the environment as they’re disposed of . The companies who’ve made profits manufacturing these products in the past are in some countries now under legal obligation to make a contribution towards getting rid of their old products properly. So if five years ago, I buy a fridge from company x, they are expected five years later to take my old fridge and dispose of it properly or at least pay towards someone else to do that. If they’re paying the bill then it would appear to be an example of full cost accounting. They are being held accountable for the environmental damage that they could create.
  9. 9. Stakeholder vs Shareholder  Managers will, first and foremost, act in the interest of the shareholder – shareholder theory  But now decisions are being made with the stakeholder in mind – stakeholder theory.  Corporate Social Responsibility is statutorily recognised in Section 172 of the Companies Act 2006.  Shareholders remain dominant in the business world and Corporate Governance, in particular, but the emergence of the stakeholder is providing a counter-argument, helped by the existence of Corporate Social Responsibility.
  10. 10. What next…  Companies should operate responsibly, with or without CSR, but is anything really happening? There is no clear answer - CSR is like “teenage sex”; everybody says they’re doing it but few actually are, and those who actually do, do it badly.  CSR has arrived in business practice and it is here to stay. It is unclear if a good and fair society can be created with the help of companies but it cannot be created without them. Businesses have a responsibility to become moral actors.  CSR should be used as a vehicle to establish benchmarks such as good management and taking responsibility for those likely to be affected by companies’ behaviour, such as working conditions for employee. We can think about the environment, the local community and the population with that community who are directly affected from the company’s product  CSR is corporate social responsibility and if businesses engage in this the right way then they won’t be ‘a company saying rubbish’.
  11. 11.  “If you do things well, do them better. Be daring, be first, be different, be just.” (Anita Roddick)  “Go out in the world and do well. But also go out in the world and do good.” (Minor Myers)

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