Corporate Social Responsibility & Sustainability


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Corporate Social Responsibility & Sustainability

  1. 1. Corporate Social Responsibility and Sustainability
  2. 2. Lecture Delivered on 26th July 2011 to Internationally Educated Professionals at The G Raymond Chang School, Ryerson University *** Dr.Suneel Sethi September 2011 Corporate Social Responsibility and Sustainability
  3. 3. OutlineI. Sustainable Development (SD) and SustainabilityII. Corporate Social Responsibility (CSR)III. What Drives Companies to Act Responsibly?IV. Priorities of CSRV. The Business Case: What do Companies Gain from CSR?VI. Operational and Organizational Implications?VII. Points for Consideration with Respect to Industrial Ecology 6 September 2011 Corporate Social Responsibility and Sustainability
  4. 4. 6 September 2011 Corporate Social Responsibility and Sustainability
  5. 5. Sustainability “Sustainability is a possible way of living or being in which individuals, firms, governments, and other institutions act responsibly in taking care of the future as if it belonged to them today, in equitably sharing the ecological resources on which the survival of human and other species depends, and in assuring that all who live today and in the future will be able to flourish, that is, to satisfy their needs and human aspirations.” - John Ehrenfeld , 20006 September 2011 Corporate Social Responsibility and Sustainability
  6. 6. What is Social Sustainability?• The social preconditions for sustainable development or the need to sustain specific structures and customs in communities and societies? (Sach, 1999)• The finality of development whilst economic and environmental sustainability are both goals of sustainable development and instruments to its achievement ? (Assefa and Frostell, 2007)• Is it an end state? or a socio-economic process?
  7. 7. Guiding Principles of Sustainability 1. Orientation towards benefit and need 2. Efficient use of resources 3. Use of renewable resources 4. Multiple use and recycling 5. Flexibility and adaptability 6. Fault tolerance and risk precaution 7. Securing employment, income and quality of life6 September 2011 Corporate Social Responsibility and Sustainability
  8. 8. Social Sustainability Key Themes and Domains6 September 2011 Corporate Social Responsibility and Sustainability
  9. 9. Theoretical Research Approaches to Social Sustainability Approach Main Authors TimelineEquity and Human Rights Sen (1985, 1992), Sachs (2001) Since mid-1980s(e.g. poverty studies and unequaldevelopment)Capital Stock Coleman (1988), Putnam (1993), Rees Since late 1980s(e.g. Social Capital, Environmental and Wackernagel (1996)capital equity and cities’ footprint)Institutional Theory and Chambers (1992) Since early 1990s Healey (1992)Governance(e.g. participation and stakeholderanalysis)Business and Corporate Elkington (1994) Since mid-1990sStudies(e.g. Triple Bottom Line, CorporateSocial Responsibility)Behavioural and Social Layard (2005) Since late 1990sSciences(Well-being, health and happinessperspective)Transition Theory Rotmans, Loorbach et al. (2006) 2000s
  10. 10. I. Sustainable Development and SustainabilitySustainable Development“Development that meets the needs of the present without compromising the ability of future generations to meet their own needs.” – World Commission on Environment and Development (WCED) ,1987The critical objectives which the WCED pinpointed from the concept of SD are: 1) Reviving growth 2) Changing the quality of growth 3) Meeting essential needs for jobs, food, water, energy and sanitation 4) Ensuring a sustainable level of population 5) Conserving and enhancing the resource base 6) Re-orienting technology and managing risk 7) Merging environment and economics in decision-making 8) Re-orienting international economic relations 9) Making development more participatory 6 September 2011 Corporate Social Responsibility and Sustainability
  11. 11. The Semantics of Sustainable Development
  12. 12. A more operational definition of Sustainable Development is that provided by UNDP (1994) which describes it as a process for realizing human development “ in an inclusive, connected, equitable, prudent and secure manner.”Where Connectivity embraces ecological, social and economic interdependence Equity suggests fairness within and across generations and species Prudence connotes care and prevention, technologically, scientifically and politically Security demands safety from chronic threats and protection from harmful disruption6 September 2011 Corporate Social Responsibility and Sustainability
  13. 13. II. CSR and Sustainable Development World Business Council for Sustainable Development (WBCSD) adds the following three concepts as being the “pillars of sustainable development.” Corporate Social Responsibility Economic Growth Ecological Balance Corporate Social Responsibility is the key to operationalizing the strategic role of business in contributing towards the sustainable development process.6 September 2011 Corporate Social Responsibility and Sustainability
  14. 14. Sustainability Frameworks for Business Industrial Ecology (Industry) The field approaches issues of sustainability by examining problems from multiple perspectives, usually involving aspects of sociology, the environment, economy and technology. The name comes from the idea that we should use the analogy of natural systems as an aid in understanding how to design sustainable industrial systems Natural Systems Behavior (General) Biomimicry (General) The mimicking of life using imitation biological systems The Natural Step (General) To avoid subjecting people to conditions which undermine their capacity to meet their own needs. Natural Capitalism (General) Natural capitalism is a set of trends and economic reforms designed to reward energy and material efficiency, and to remove professional standards and accounting conventions that prevent such efficiencies. It emerged in the 1990s as a coherent theory of how to exploit market systems and mechanisms of neoclassical economics to save energy, discourage waste, mimic ecology (biomimicry), and in general to support the goals of environmentalism by re-framing commodity and product relations towards a strictly service economy, thereby extending the services of natural capital. As a proper noun with capital letters, Natural Capitalism usually refers to the specific set of reforms described by Paul Hawken, Amory Lovins, and Hunter Lovins in the 1999 book Natural Capitalism: Creating the Next Industrial Revolution, published by Rocky Mountain Institute.6 September 2011 Corporate Social Responsibility and Sustainability
  15. 15. Corporate Social Responsibility Allows Businesses to Engage with and Contribute to Society as a Corporate CitizenThis involves– Taking a position– Active commitment– ResponsibilityIt meansMaking a difference in one’s community, one’s society, and one’s countryIt involvesParticipation ( a crucial feature of sustainable development )6 September 2011 Corporate Social Responsibility and Sustainability
  16. 16. A View of Corporate Social Responsibility PHILANTHROPIC (voluntary contributions to society) ECONOMIC (enhancing stakeholder wealth) ETHICAL (obedience to interpersonal norms and principles) LEGAL (obedience to laws and regulations) Adapted from Archie Carroll (1991). The Pyramid of Corporate Social Responsibility. Business Horizons, 42: 39-48.6 September 2011 Corporate Social Responsibility and Sustainability
  17. 17. What are the Big Issues ? Climate Change Poverty Water HIV/AIDS/Malaria ,etc. Labor Practices Community “License to Operate” Transparency Good Governance Values-Driven Decision Making Ethical Marketing Practices6 September 2011 Corporate Social Responsibility and Sustainability
  18. 18. Forces At Work• Increased Stakeholder Activism• More Sophisticated Stakeholder Engagement• Proliferation of Codes, Standards, Indicators, and Guidelines• Accountability throughout the Value Chain• Transparency and Reporting• Growing Government Interest and Action• Convergence of CSR and Government Agendas• Growing Investor Pressure and Market Based Incentives• Advances in Information Technology• Pressure to Quantify CSR as Return on Investment (ROI) 6 September 2011 Corporate Social Responsibility and Sustainability
  19. 19. Business Importance of CSR • Improved Financial Performance • Reduced Operating Costs • Enhanced Brand Image and Reputation • Increased Sales and Customer Loyalty • Increased Productivity and Quality • Increased Ability to Attract and Retain Employees • Reduced Regulatory Oversight • Access To Capital6 September 2011 Corporate Social Responsibility and Sustainability
  20. 20. Corporate Social Responsibility and Corporate CitizenshipCorporate Social Responsibility (CSR) refers to business decision-making linked toethical values, compliance with legal requirements, and respect for people,communities and the environment There is no single commonly accepted definition of CSR “CSR is the voluntary assumption by companies of responsibilities beyond purely economic and legal responsibilities.” - Piacentini et al, 2000 “CSR is the degree of moral obligation that may be ascribed to corporations beyond simple obedience to the laws of the state.”- Kilcullen and Kooistra, 1999 “Operating a business in a manner that meets or exceeds the ethical, legal, commercial and public expectations that society has of business.” - Business for Social Responsibility, 2001 6 September 2011 Corporate Social Responsibility and Sustainability
  21. 21. The Corporate Citizen Central to the understanding of CSR, is the idea of the corporation as an entity createdand empowered by a state charter to act as an individual, as a citizen. ¤¤¤¤ This gives the corporation the right to own, buy and sell property, to enter intocontracts, to sue and be sued, and to have legal accountability for damages and debtonly to the limit of the shareholders’ investment. ¤¤¤¤ Fifty-three of the world’s largest ‘economies’ are corporations and not nation states. ¤¤¤¤ Hardly surprising that growing attention is being given to CSR issues. ¤¤¤¤ Society is becoming less tolerant of companies which fail to meet its high expectations,the roles and responsibilities of business are coming increasingly under debate. ¤¤¤¤ Why should such a Citizen be able to operate free of any moral constraints?
  22. 22. Stakeholders vs. Shareholders• Business has many stakeholders Responsibility to all Stakeholders (including customers, employees and the local community) to • Shareholders, Investment Banks, Analysts • Board of Directors, C-Suite, Employees satisfy, and not just shareholders • Customers• Moral concerns of these • Environment • Suppliers & Partners stakeholders generate concerns • Community that are eventually reflected in • Non-governmental organizations (NGOs) regulation and case law Why Stakeholders vs. Shareholders ?• Proactive companies which focus on moral and social • Technology creates the global fishbowl • Everyone has an opinion and can share it concerns can establish first • Diminishing expectations of government mover (adopter) advantages by • Rise of NGOs and individual citizens responding early to the stakeholders’ concerns Society• What is good for society is good for business Business Decision-making Implementation Benefit Distribution Government6 September 2011 Evaluation
  23. 23. III. What Drives Companies to Act Responsibly ? Philanthropic Strategic6 September 2011 Corporate Social Responsibility and Sustainability
  24. 24. In brief CSR involves an alignment of corporate goals with those of society Involves companies responding to, and acting in accordance with, legal, moral and social concerns represented by company stakeholders CSR activities are often referred to as being in three different but connected realms. This is known as the “triple bottom line” . People Planet Profit Obligation to society !6 September 2011 Corporate Social Responsibility and Sustainability
  25. 25. IV. Priorities of Corporate Social Responsibility
  26. 26. V. The Business Case What Can Companies Gain From CSR? More Supportive• Improved Financial Performance External• Reduced Operating Costs Environment,• Enhanced Brand Image and Reputation and• Increased Sales and Customer Loyalty Philosophical• Increased Productivity and Quality Justifications for• Increased Ability to Attract and Retain Employees Ethically• Reduced Regulatory Oversight ‘Correct’• Access to Capital Behavior 6 September 2011 Corporate Social Responsibility and Sustainability
  27. 27. Difficulties Social responsibility is not always evident and company managers often findthemselves with less than perfect knowledge Pressures on corporations for increased transparency and reporting is being felt fromboth governments and society There needs to be: Greater integration of environmental and social elements into management systems and strategy Indicators to measure performance Practical guidance on reporting and disclosure Companies may feel they are being pulled in different direction by the need to deliverand report on a myriad of issues Need to make sense of the information overload ! 6 September 2011 Corporate Social Responsibility and Sustainability
  28. 28. VI. Operational and Organizational Implications?Stem from Complexity, Uncertainty and InterdependenceNo single body [company] can be expected to take sole responsibility for thecontinuously evolving and uncertain nature of human and ecological systemsExternal Environment • Stakeholders such as local peoples and governments should be included in a systemic inquiry and decision-making process. This will allow for the establishment of common objectives • Participative and well connected management strategies and infrastructures are neededInternal EnvironmentCompanies also need to insure appropriate internal organizational structure,responsibility and information availability i.e., internal interconnectedness andfeedback between departments 6 September 2011 Corporate Social Responsibility and Sustainability
  29. 29. VII. Points for Consideration with Respect to Industrial EcologyCan Industrial Ecology remain a disciplinedominated by technical specialists?Should it be integrated with social scientists(including economists), and even possiblyeven local ecological knowledge?How can stakeholders have moreinput in the decision-making process?Who? What? When? Why? How? 6 September 2011 Corporate Social Responsibility and Sustainability
  30. 30. Comments Ecosystems and social systems are not simple or linear CSR is not a simple linear activity. It is especially complicated whenimplemented in areas that are ecologically, socially, economically, andculturally diverse One needs to consider all forms of relevant information and shouldinvolve all relevant sectors of society and scientific disciplines Wholly integrate CSR ideals in organizational activities, preferably fromthe outset, including impact assessment and associated on-goingmonitoring Management must recognize that change is inevitable, and should allowCSR strategy to be adaptive, to evolve and develop Seek to work with rather than ignore this complexity6 September 2011 Corporate Social Responsibility and Sustainability
  31. 31. Some Companies which Publish CSR Reports
  32. 32. What will You Do (for Sustainable Development) as A Corporate Citizen? 6 September 2011 Corporate Social Responsibility and Sustainability
  33. 33. An Eco Efficient Company..... • Reduces the material intensity of its goods and services • Reduces the energy intensity of its goods and services • Reduces the dispersion of any toxic materials • Enhances the recyclability of its materials • Maximizes the sustainable use of renewable resources • Extends the durability of its products • Increases the service intensity of its goods and services6 September 2011 Corporate Social Responsibility and Sustainability
  34. 34. Implementation Steps• Mission, Vision, and Value Statements• Cultural Values• Corporate Governance• Management Structures• Strategic Planning• General Accountability• Employee Recognition and Awards• Communications, Education, and Training• CSR Reporting• Use Of Influence6 September 2011 Corporate Social Responsibility and Sustainability
  35. 35. Thank You Dr.Suneel Sethi drsuneelsethi@gmail.com6 September 2011