2011 Lecture Notes - MSc Corporate Communications


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Introduction to PR and corporate communications

MSc in Corporate Communications, London School of Economics

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2011 Lecture Notes - MSc Corporate Communications

  1. 1. Corporate Social Responsibility Lesley Muir 24 th January 2011
  2. 2. Content for Today <ul><li>CSR and the role of business </li></ul><ul><li>Definitions and practice </li></ul><ul><li>Current factors behind its importance </li></ul><ul><li>Trust, its connection with CSR and research </li></ul><ul><li>CSR and communication </li></ul><ul><li>How should firms practice CSR? </li></ul><ul><li>Issues and evidence it works </li></ul><ul><li>Case studies </li></ul>
  3. 3. Role of Business <ul><li>Pure profit making – economic responsibility. Businesses obey the law but have lower ethical standards (Smith) – invisible hand </li></ul><ul><li>Constrained profit making - Wealth for shareholders, obey the law and act ethically (Friedman) </li></ul><ul><li>Socially aware – show sensitivity to stakeholders, be aware of possible harm </li></ul><ul><li>Community service – use vast resources for social good – (social enterprise) </li></ul><ul><li>One vs two way relationships in communication context </li></ul>Firm is pure profit making – ANTI CSR Firm as an instrument of social policy – PRO CSR Win-win
  4. 4. Economic Role in Society <ul><li>Operating models - Input-output vs. stakeholder models </li></ul><ul><ul><li>Financial gain, instrumental, one way into firm </li></ul></ul><ul><ul><li>Financial and social, instrumental and normative, two-way relationships </li></ul></ul><ul><li>Novak (1996) key economic responsibilities: </li></ul><ul><ul><li>Satisfy customers: value </li></ul></ul><ul><ul><li>Generate returns for investors </li></ul></ul><ul><ul><li>Create wealth; and create and maintain jobs </li></ul></ul><ul><ul><li>Generate upward mobility - sense of aspiration for future </li></ul></ul><ul><ul><li>Promote innovation </li></ul></ul><ul><ul><li>Avoid monopolistic situations which disadvantage customers </li></ul></ul><ul><ul><li>Extra-legal social responsibilities: </li></ul></ul><ul><ul><ul><li>Communicate with stakeholders </li></ul></ul></ul><ul><ul><ul><li>Establish community among employees </li></ul></ul></ul><ul><ul><ul><li>Protect moral ecology i.e. advertise ethically </li></ul></ul></ul>
  5. 5. What is CSR? <ul><li>Calculated philanthropy? – Philip Morris </li></ul><ul><li>Behaving in a way that meets the expectations for a company in your industry and markets to better the interests of stakeholders broadly - Edelman </li></ul><ul><li>CSR is about how companies manage their business processes to produce an overall positive impact on society – Mallen Baker, CSR consultant </li></ul><ul><li>Management activity concerned with actively working to develop positive and sustainable business practices, minimising the impact of an organisation upon its environment – previous UK Government </li></ul><ul><li>The Economist – simply good management </li></ul><ul><li>Usually 3 focal points – environment, community and employees </li></ul>
  6. 6. CSR in Practice <ul><li>Sustainability </li></ul><ul><li>Community relations </li></ul><ul><li>Issues management </li></ul><ul><li>Cause-related marketing </li></ul><ul><li>Employee engagament </li></ul><ul><li>Employee volunteering </li></ul><ul><li>Donations / sponsorship </li></ul>
  7. 7. Why is CSR significant? <ul><li>Greater Access to Information </li></ul><ul><ul><li>more educated and informed publics </li></ul></ul><ul><ul><li>awareness of regulation </li></ul></ul><ul><ul><li>media globalisation – “the CNN world” </li></ul></ul><ul><ul><li>decline of public trust in big institutions </li></ul></ul><ul><li>Activism: anti-globalisation, anti-corporate – No Logo generation </li></ul><ul><ul><li>Consumer pressure as a force for change </li></ul></ul><ul><ul><li>51% talked about company behaviour to peers (Mori 2002) </li></ul></ul><ul><ul><li>32% advised someone not to use a company for “irresponsible behaviour” </li></ul></ul><ul><ul><li>¼ of people worldwide had “punished” a company for ‘unethical’ behaviour Mori (1999) </li></ul></ul><ul><li>Legitimacy gap between corporate behaviour and social expectations </li></ul><ul><ul><li>Boardroom corruption, environmental impacts, </li></ul></ul><ul><ul><li>Unethical practices </li></ul></ul><ul><li>Prevention of reputation damage </li></ul><ul><ul><li>Rebuild trust, license to operate? </li></ul></ul><ul><ul><li>Obvious role for corporate communications </li></ul></ul>
  8. 8. Crisis of Trust - 2005 <ul><li>Growth of information society corresponded with decline in trust? </li></ul><ul><li>“ Democratisation” of trust </li></ul><ul><ul><li>Edelman Trust Barometer - 10th year </li></ul></ul><ul><ul><li>Highly trusted groups today: NGOs, Internet blogs, “a person like myself” - peer opinions “Kevin”, local and PSB media, traditional community figures, TV vs. other media forms, employees </li></ul></ul><ul><ul><li>Credibility of peers rose from 22% in 2003 to 56% in 2005 – US and 33% in 2003 to 53% in 2005 - Europe </li></ul></ul><ul><ul><li>Poorly trusted: government, international, commercial media, [US] companies (culture and values), institutions and authority </li></ul></ul><ul><ul><li>Declining trust in corporations – linked to reputation </li></ul></ul>
  9. 9. Trust Now <ul><li>2009 report - Jan 2010 </li></ul><ul><li>Reached rock bottom levels - effects of economic crisis </li></ul><ul><ul><li>4.5K global ABC consumers </li></ul></ul><ul><ul><ul><li>62% trust business less than year ago, governments are worse </li></ul></ul></ul><ul><ul><ul><li>Lower than after Enron and dot com crash </li></ul></ul></ul><ul><ul><ul><li>US worst decline - 38% “trust business to do what’s right” (down 20%, ~Europe - 36%) </li></ul></ul></ul><ul><ul><ul><li>66% think business has responsibility to resolve global issues with governments </li></ul></ul></ul><ul><ul><ul><li>aged 25-34 trust business more than older consumers </li></ul></ul></ul><ul><ul><li>Trust divide - Europe/US vs Asia </li></ul></ul><ul><ul><ul><li>China/Indonesia/Brazil - average 69% trust business </li></ul></ul></ul><ul><ul><li>NGOs are most trusted institutions </li></ul></ul><ul><ul><li>Outside experts - doctors, academics - important allies to help restore trust in business </li></ul></ul><ul><ul><ul><li>US - 17% trust CEOs </li></ul></ul></ul><ul><ul><li>Media trust declined - TV coverage 36%, newspapers 34% </li></ul></ul>
  10. 10. Restoring Trust <ul><li>Foundations to build trust </li></ul><ul><ul><li>Consistency - transparency </li></ul></ul><ul><ul><li>Dialogue - mutual understanding </li></ul></ul><ul><ul><li>Time </li></ul></ul><ul><li>Public engagement strategy </li></ul><ul><ul><li>4 pillars: private sector diplomacy, mutual SR, shared sacrifice, frequent communications </li></ul></ul><ul><li>Contributor not controller – social media </li></ul><ul><li>Say and do as you say…. </li></ul>
  11. 12. CSR Classification Sk/der good Firm’s good Mandatory Optional Strategic CSR Ethical CSR Altruistic CSR
  12. 13. Ethical Altruistic Strategic Mandatory Optional – affirmative duties Optional – need for targeted approach Meeting social obligations Outside scope of firm’s obligations Enlightened self-interest Beneficial for firm and society. Nothing remarkable Beneficial for society damaging for firm. Rare Beneficial for firm and society. Minimise govt intervention Minimum level of CSR Unethical use of resources Win win
  13. 14. Why do CSR? <ul><li>Martin (2002) Virtue Matrix </li></ul><ul><li>Evaluate CR opportunities </li></ul><ul><li>Globalisation heightens CR anxieties – shifting frontiers </li></ul>FRONTIER - INTRINSIC CIVIC - INSTRUMENTAL Structural e.g. P&G anti bribery Compliance Choice i.e. workplace crèche Strategic i.e. GSK Prudential
  14. 15. Should firms do CSR? <ul><li>Ethical vs altruistic vs strategic? </li></ul><ul><li>Lantos (2002) only if PR driven - altruistic CSR only ethical for private firms </li></ul><ul><li>Porter and Kramer (2002) – strategic CSR can bring competitive advantage </li></ul><ul><ul><li>Channel activities to improve competitive context </li></ul></ul><ul><ul><li>Argue Friedman et al only right if philanthropy is “non-strategic” </li></ul></ul><ul><ul><li>Flawed by 2 implied assumptions that: </li></ul></ul><ul><ul><ul><li>Social and business objectives are always separate and distinct </li></ul></ul></ul><ul><ul><ul><li>Firms can contribute no greater benefit than individual donors </li></ul></ul></ul><ul><ul><li>P&K say improve competitive context improves long term profits plus diffuses critics in non-market groups. </li></ul></ul><ul><ul><li>4 elements of competitive context: </li></ul></ul><ul><ul><ul><li>factor conditions e.g. Dreamworks </li></ul></ul></ul><ul><ul><ul><li>demand conditions e.g. Apple </li></ul></ul></ul><ul><ul><ul><li>context for strategy and rivalry e.g. Portman Group </li></ul></ul></ul><ul><ul><ul><li>clustering for related and supporting industries e.g. Silicon Valley </li></ul></ul></ul><ul><ul><li>Cisco (factor improvement) vs Avon (cause related marketing) </li></ul></ul><ul><ul><li>Acid test for CSR – would you still do it anyway if no-one knew about it? </li></ul></ul>
  15. 16. Values Policies, procedures and processes Vision – org identity, objectives etc Objectives, stakeholder priorities, corporate competencies CSR Prog CSR Drivers S/h attitudes and behaviours Business Outcomes Social Outcomes Reputation Employee behaviour and motivations Customers Employees Govt NGOs Community Suppliers Investors <ul><li>Revenue </li></ul><ul><li>Preference </li></ul><ul><li>Retention </li></ul><ul><li>Productivity </li></ul><ul><li>Cost </li></ul><ul><li>Emp retention </li></ul><ul><li>Red wastage </li></ul><ul><li>Risk </li></ul><ul><li>Legitimacy </li></ul><ul><li>Disaster </li></ul><ul><li>Rev Volatility </li></ul>Source: Knox and Maklan (2004) Linking CSR to Business Outcomes
  16. 17. Criticisms of CSR <ul><li>Highly complex and fraught with issues </li></ul><ul><ul><li>Main benefits are poorly evidenced as attitudes not behaviours </li></ul></ul><ul><li>L’Etang 2 main types – crisis and community </li></ul><ul><ul><li>Moral frameworks uncritically applied </li></ul></ul><ul><ul><ul><li>Utilitarian (self interest) vs deontological (duty) </li></ul></ul></ul><ul><ul><ul><li>Distinguish truly “moral” CSR </li></ul></ul></ul><ul><ul><li>CSR just a tactic of PR for relationship development and image management </li></ul></ul><ul><li>Poorly communicated – non-standardised reporting </li></ul><ul><li>Lack of business integration to see benefits </li></ul><ul><ul><li>Outcomes vs actions </li></ul></ul>
  17. 18. Evidence CSR Works <ul><li>Greater total shareholder returns </li></ul><ul><ul><li>CR Index participants outperformed FTSE 350 between 2002-07 by up to 8% in TSR – (5 and 10% sig) </li></ul></ul><ul><li>Lower stock market volatility </li></ul><ul><ul><li>Over 6 years, higher CR scores meant company better managed social and environmental issues (5% sig) </li></ul></ul><ul><li>Dow Jones Sustainability Index 2008 </li></ul><ul><ul><li>+ve correlations plus significant impact on “cost of external financing, return on capital, sales growth and fade rate of competitive advantage” </li></ul></ul><ul><li>Increased importance in boardrooms </li></ul><ul><ul><li>2002 – 13% CR on board vs 60% in 2007 </li></ul></ul><ul><li>Source: Mori/BITC report 2008 </li></ul>
  18. 19. Current issues in CSR <ul><li>CSR: Measuring the triple bottom line </li></ul><ul><ul><li>How? </li></ul></ul><ul><ul><li>Schneitz & Epstein (2005) study – CSR had “insulating effect”, creating a “reservoir of goodwill” </li></ul></ul><ul><li>Communication of CSR activities (Dawkins, 2004) </li></ul><ul><ul><li>Communication is missing link – balance </li></ul></ul><ul><ul><li>Tailored communication approaches </li></ul></ul><ul><ul><ul><li>Attract employees, investment evaluations, consumer marketing </li></ul></ul></ul><ul><ul><li>Consider source and intensity </li></ul></ul><ul><ul><ul><li>Employee communication – ambassadorial approaches </li></ul></ul></ul><ul><ul><ul><li>88% expect to see CSR reporting </li></ul></ul></ul>
  19. 20. Is CSR still relevant? <ul><li>FT - The hot air of CSR </li></ul><ul><li>BITC: how you do business is what counts </li></ul><ul><ul><li>Building mutual trust </li></ul></ul><ul><ul><li>Focus on values and culture </li></ul></ul><ul><ul><li>Sustainability – including business practices! </li></ul></ul><ul><ul><li>Governance and regulation </li></ul></ul><ul><li>“ Customers want to do business with those they trust; employees want to work for businesses whose values they share; local authorities want people as neighbours who do well so I think as we go through these very tough times one has to watch what business is doing and how it’s responding.” </li></ul><ul><li>Dame Julia Cleverdon, Vice President, Business in the Community </li></ul>
  20. 22. Award Winning Case Studies <ul><li>Environment and Education </li></ul><ul><li>Workplace Safety </li></ul><ul><li>Health </li></ul>