Corporate Responsibility and Business Strategy

Corporate responsibility strategy in business Business School, University of Kent, 24 th March 2010 Toby Webb, Ethical Corporation [email_address] www.ethicalcorp.com / ethicalcorp.blogspot.com

What do we mean by CR? In India , it often means working with NGOs, taking a philanthropic approach and contributing to offsetting the worst aspects of poor infrastructure in the country In Colombia , it can mean helping with post conflict reconstruction and societal rebuilding In South Africa , it can mean building up a supply base, like Marks & Spencer are doing, that is both economically sustainable and worker-friendly – and helping tackle HIV / Aids. In France , it can mean picking up where the government has failed on some social issues, negotiated agreements on working hours and conditions, and environmental issues In Ukraine , it means sponsoring church rebuilding, book publishing and encouraging basic skills improvements in the workforce. It should also mean corporate governance. Finally, in Cambodia , it can mean a partnership with the ILO, NGOs and IGOs to create a ‘cluster’ of factories where labour standards and union rights are respected.

We shouldn’t talk about CR But about Evidence Based Management. CSR – or responsible business - should be discussed as: Corporate governance and access to capital Human capital management: Getting better people and keeping them Doing business honestly – effective measures against corruption Improving community relationships and building a bank account of trust Communicating well with consumers, and treating them right Better environmental and social risk management Cost savings via environmental efficiencies Better relations with governments , at home and abroad A great way to find new opportunities for products and services

Is this the future?

When things go wrong…

Business and Govt action:
Wal-Mart: committed to being supplied 100% by renewable energy, creating zero waste and selling environmentally-friendly products
BT : 80% carbon emissions reduction target by 2020
ArcelorMittal , Corus and ThyssenKrupp : 1 billion Euro research project on gas recycling and CCS in EU
Interface: Aiming to be environmentally neutral by 2020. 60% achieved
South Korea: South Korea Green Growth Plan : $84bn five-year programme to develop green industry as growth engine for entire Korean economy

Business action:
Tesco : £100 million climate technologies fund, pledged to cut energy usage per square foot by 50% by 2010, compared to 2000 levels
Iberdrola : World’s largest provider of renewable energy: 44GW of renewable assets at different stages of development, 95% of it wind power
Shell: Includes cost of carbon emissions when budgeting for all new projects
Unilever : Reduced CO2 emissions in manufacturing operations by more than 30% in a decade
Lafarge : 20% cut in net emissions per tonne of cement worldwide and a 10% cut in absolute emissions in industrialized countries by 2010, from 1990 levels

Business and Climate Change strategy Marks and Spencer: Achievements, commitments, opportunities
Plan A launched January 2007
Stores 10% more energy efficient. Logistics 20% more fuel efficient
Reduced food packaging by 16% and food carrier bag usage by 83%. Saved £50 million in 2009
2010: 80 new commitments . Complement the existing 100 which will still be delivered by 2012 (45 already achieved).
Build Plan A into every one of the 2.7 billion individual M&S products sold each year by 2020 ( 50% of products by 2015 )
Help 1 million M&S customers develop their own personal Plan A by 2015 and 3 million by 2020.
£100,000 prize (Your Green Idea) for the best customer idea to help green M&S
Offering employees free loft insulation

Business and Climate Change strategy Vodafone Group: Plans and strategies:
Climate change strategy two key elements :
Cut emissions by 50% by 2020 (from the 2006/07 baseline).
Provide products and services to help customers reduce their emissions
Improving energy efficiency, making greater use of renewably generated energy
Networks account for more than 80% of the CO2 emissions
Using more renewable energy . Exploring opportunities to install more on-site
Help customers reduce carbon footprint. Reducing the need to travel and facilitating intelligent energy management systems .
Research by the Global e-Sustainability Initiative suggests that ICT technology could help other industries and consumers avoid 7.8 gigatonnes of CO2-equivalent emissions – 15% of predicted total global emissions by 2020

Prahalad and Hart
Grayson and Hodges
Andrew Savitz
Mallen Baker
Chris Laszlo
Kellie McElhaney
David Vogel (critical of catch-all business case)
CSR: Innovation and opportunity, key writers:

Prahalad and Hart :
Target the 4 billion people living on less than $2 per day (1998) or 3.1 billion
living on less than $2.50 a day (Ethicalcorp 2009)
Later expanded by:
Prahalad (2004) “The Fortune at the Bottom of the Pyramid “
Hart (2005) “Capitalism at the Crossroads”
Prahalad :
Stop thinking of the poor as victims
Start seeing them as resilient and creative entrepreneurs
As value-demanding consumers poor of today are middle-class of tomorrow
Considers poverty reducing benefits in capacity building

Hart suggests:: focus on poor as business partners and innovators , rather
than just as potential producers or consumers.
Hart's Base of the Pyramid Protocol : business partnerships with income-poor
communities "co-create businesses and markets that mutually benefit
the companies and the communities".
Adopted by the SC Johnson Company and Solae Company (subsidiary of DuPont)
Aneel Karnani (2007) says no fortune at the bottom of the pyramid!
Says for most multinational companies the market is actually very small.
Karnani suggests only way to alleviate poverty is to focus on the poor as producers , rather than as a market of consumers.

Microcredit : 5.8 million borrowers, small loans averaging $120 (bopnetwork.org 2006)
ITC and e-Choupals : (village squares wired up) small farmers check market trading price of produce and sell it directly to ITC.
Farmers and ITC have increased their revenues, efficient communication between buyer and seller
( Microsoft and HP do similar work in countries such as India via rural communications centers: more philanthropic and political)
Hindustan lever : Shampoo that works well with cold water in small sachets
Further BOP examples:

SC Johnson Company : Works with youth groups in the Kibera slum of Nairobi, Kenya.
Community-based waste management and cleaning company, providing home-cleaning, insect treatment, and waste disposal services for residents of the slum.
Unilever’s Shakti initiative helps women in rural India set up small businesses as direct to consumer retailers. 45,000 women helped to date. Scheme equips women with business skills and a way out of poverty
Creates a crucial new distribution channel for Unilever products in the large and fast-growing global market of low-spending consumers.
By 2010 the Shakti network aims for 600 million consumers .
Lifebuoy soap campaign encourages handwashing: work with Indian govt to reach 70 million potential buyers via social marketing

2006, Grameen Group and Groupe Danone opened first factory of Grameen Danone Foods
50-50 business partnership between the companies to locally produce and sell nutritionally enhanced yogurt products. Yogurt contains iron, zinc, and iodine supplements
Addressing the needs of a country where 48 percent of children under five are malnourished.
New venture is expected to create over 1000 livestock and distribution jobs to community members previously trained in micro finance.
Business case: "only an economically viable solution can bring people lasting benefits,” Danone CEO Franck Riboud (bopnetwork.org 2006)

Discussions underway with EU Commission to link up 46 billion EU aid budget
with BOP schemes
Focus on nutrition and hygiene : Govts could support development of diary farmer supply chain for Danone
Companies: Unilever, Danone, GDF-Suez, Johnson & Johnson, Microsoft, Nestle, Procter & Gamble, Vodafone (all have BOP schemes)
Unilever study estimates 100,000 jobs in South Africa due to its presence!!!)
ActionAid and Christian Aid oppose too much capitalism in development: concerns about MNC's using BOP for profit motives (EthicalCorp 2009)

Grayson and Hodges said move from risk to opportunity: From boycotts and
campaigns to profits
"Opportunity maximisation" should be harnessed
Treating employees well, how consumer marketing can gain trust
CEOs say employees want to work for a "company they feel proud of". Many
companies say convinced by this!
(EC conferences on employee engagement never sold as well as reporting and communications events!)
Seven steps : Triggers/priorities/business case/action/resources &
integration/engagement/reporting & communications
Case studies: SAB Miller in Uganda/ M&S UK marketing & trust/Bank of
America community banking
Grayson and Hodges: Corporate Social Opportunity

Discusses the "Sustainability sweet spot" : Matching opportunity with
expectations from society
Hershey : Attempts to sell the company misjudged local stakeholder opinion
Toyota Prius: works for shareholders and the environment
Microsoft : Giving computers to public schools with software on (strategic philanthropy)
Proctor & Gamble : Doing business with those on less than $1 a day
GE : Ecomagination products on environment, clean tech investment
Pepsi : Obesity as a problem, bought healthy food products that grow faster than
traditional lines
Triple bottom line profitability : Andrew Savitz on opportunities

Companies all said for years employees are number one driver for CSR (KPMG 2004)
2006 Mori survey found 58% of employees in the UK thought the social and
environmental responsibilities of their organisation were important.
£50m is given to charities each year through the Give As You Earn scheme, the most popular of such initiatives
Analysis suggests employees' perceptions of corporate social responsibility have a major impact on organisational commitment .
(Brammer and Millington, University of Bath School of Management 2006)
CSR is cheaper than pay rises, may help in a recession...
Opportunity: Employees and CSR

New opportunities for products: Certification, Wind turbines, industrial technology (i.e. Unilever, Kraft, Mars, Cadbury, GE, Siemens, Toshiba)
Preferred partner for leading companies: Big firms expect more
Supporting diverse supplier base, develop loyal SME suppliers
Increased likelihood of government contracts: Over time…
Closer and more trusted relationships with customers, NGOs
CR and modern business development :

Where we see the most progress: Niche brands : Innocent, Seventh Generation, Good Energy, Bullfrog Power, Triodos bank, Interface, Timberland, Body Shop etc Big Industrial companies : GE, Siemens, Toshiba, Nissan, Toyota, Intel Consumer brands : P&G, Unilever, Marks & Spencer, Cadbury, Tesco/Asda Reputationally vulnerable companies : Pharmaceuticals, heavy industry, extractive industry firms – Shell, BP, Exxon, BHP, Sakhalin Energy, Xtrata, and even some banks!
CR and modern business development :

Operational Efficiency Business Growth Responsible Company Strategic long term objectives Strategic focus areas, 2010-12 Reduce the CO 2 emission intensity of our global operations by 40 % in the period from 2008 to 2017 Deliver transformative solutions contributing to the creation of a sustainable society Strategic Group initiatives CO 2 /Energy efficiency Sustainable Procurement Recycling M2M growth Research & Innovation Sustainable Portfolio Travel and Transportation The Telenor Way Branding Develop and deliver solutions enabling our customers to reduce their CO 2 emissions and energy costs Telenor’s Climate Change Strategy Mission statement

CR and strategy: Where it’s harder for CR to get traction in strategy: Hospitality /Travel (All hotels greenwash together now!) Cheap retail : Primark, Lidl, Aldi Finance : Banks and insurance companies poor communicators (no Professional services / B2B companies, Law firms Why? Lower exposure. Less pressure This is changing slowly - but accelerating in pace

Prius sales 6.4% of Toyota’s world-wide sales in 2009.

Business and Climate Change

Further reading: Kanter, R. (2009) SuperCorp: How Vanguard Companies Create Innovation, Profits, Growth, and Social Good, Crown Business, Boston Savitz, A. (2006) The Triple Bottom Line: How Today's Best-Run Companies Are Achieving Economic, Social and Environmental Success - and How You Can Too. London: Wiley Publishing. Vogel, D. (2005) The Market for Virtue: The Potential And Limits Of Corporate Social Responsibility. Washington, DC: Brookings Institution Press. Crane, A., and Matten, D. (2007) Business Ethics, second edition. Oxford: Oxford University Press. Search Ethicalcorp.com for: Social innovation, Danone, Unilever, Grayson

Business and Climate Change Resources: FC Business Intelligence websites: www.EthicalCorp.com ClimateChangeCorp.com WindEnergyUpdate.com NuclearEnergyInsider.com CspToday.com (solar) CpvToday.com (solar) ThinFilmToday.com (solar) Thank you! Toby.Webb@ethicalcorp.com +44 (0) 207 375 7561. Blog: www.ethicalcorp.blogspot.com

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Corporate Responsibility and Business Strategy

by Toby Webb on Mar 24, 2010

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