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Lecture One: Introduction to Corporate Responsibility (2011 class)

A lecture looking at the history, drivers and actions around the development and expansion of the corporate responsibility movement/trend post WWII to present day.

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Lecture One: Introduction to Corporate Responsibility (2011 class)

  1. 1. Introduction to Corporate Responsibility Toby Webb, Founder, Ethical Corporation, MSc Corporate Governance and Ethics class, Corporate Responsibility module, Birkbeck College, University of London, January 20 2011
  2. 2. Lecture One: Introduction to CR <ul><ul><li>What is CR? Some definitions... </li></ul></ul><ul><ul><li>“ ...a concept whereby  organizations   consider the interests of  society  by taking responsibility for the impact of their activities on  customers , suppliers,  employees ,  shareholders ,  communities  and other  stakeholders , as well as the  environment .” (Wikipedia, 2008) </li></ul></ul><ul><ul><li>&quot;The social responsibility of business encompasses the economic, legal, ethical, and discretionary expectations that society has of organizations at a given point in time &quot;. (Carroll, 1979) </li></ul></ul><ul><ul><li>&quot;A concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis . &quot; (European Commission 2008) </li></ul></ul><ul><ul><li>Late Victorian Quakers (Cadbury, Lever Brothers) and Victorian philanthropists credited with beginning 'modern' CSR. Owen (1771-1858) pioneered ‘human capital’ </li></ul></ul>
  3. 3. Lecture One: Introduction to CR <ul><ul><li>In 1953, Bowen &quot;Father of CSR&quot; conceptualised CSR as social obligation  – the obligation “to follow those lines of action which are desirable in terms of the objectives and values of our society”. </li></ul></ul><ul><ul><li>Drucker was one of the first to explicitly address CSR, as one of the eight key areas for business objectives developed in his 1954 book, The Practice of Management. (Nowak, Thomas 2006)  </li></ul></ul><ul><ul><li>Merrick Dodd and Adolf Berle argued about shareholder vs. stakeholder primacy (1932) </li></ul></ul><ul><ul><li>“ There is one and only one social responsibility of business – to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game , which is to say, engage in open and free competition, without deception or fraud.” (Friedman 1970) </li></ul></ul><ul><ul><li>  Modern critics, such as Reich (2007) and commentators such as Gill (2008) say CSR is overly market friendly. Other critics include Clive Crook (2005), David Henderson (2001) and Aneel Karnani (2010) </li></ul></ul>
  4. 4.   <ul><li>Where does CR come from? </li></ul><ul><ul><li>CSR is an evolution of business ethics…which comes from human ethics and early Greeks </li></ul></ul><ul><ul><li>Adam Smith's Theory of Moral Sentiments (1759 ) is an important early text, since it addresses both ethics and business. </li></ul></ul><ul><ul><li>Business ethics in some ways emanated from religion or paradigms: i.e. quakerism, jesuits  </li></ul></ul><ul><ul><li>But also from actions of large companies and societal expectations: </li></ul></ul><ul><ul><li>The East India Company, Dutch East India Company, Standard Oil, JP Morgan, (Robins 2006, Litvin 2003) </li></ul></ul><ul><ul><li>For more on why corporate ethics mattered in a pre-WWII world see: “Empires of Profit” by Daniel Litvin and “The Corporation That Changed The World: How The East India Company Shaped The Modern Multinational” by Nick Robins </li></ul></ul>Lecture One: Introduction to CR
  5. 5.   <ul><li>Where does CR come from? </li></ul><ul><li>Scandals in the 1960s over chemicals ( Carson's  Silent Spring, 1962) and automotive safety (GM and Ford, Ralph Nader’s “Unsafe at any Speed”) </li></ul><ul><li>Increasing wealth in the 1960s in Europe e.g. Sweden and leisure time in the countryside </li></ul><ul><li>The 1960s - a decade of social activism. Late 1960s and early 1970s activism hits temporary peak. </li></ul><ul><li>Activities of companies such as DuPont in Vietnam (napalm) were questioned </li></ul><ul><li>Earth Day 1970 , publication of the Limits to Growth report, Erlich's Population Bomb added to fears of global collapse  </li></ul><ul><li>Economic and political turmoil of the mid and late 1970s overshadowed some of these fears </li></ul>Lecture One: Introduction to CR
  6. 6.   <ul><ul><li>Early 1980s green groups founded in the 1960s and 1970s slowly gain traction.  Rising middle class wealth in Europe and the US a factor </li></ul></ul><ul><ul><li>Movements such as CND raised public environmental and political awareness around issues such as nuclear, alongside whaling, acid rain and recycling </li></ul></ul><ul><ul><li>In the UK, complaints about the &quot; selfish society &quot; engineered by Margaret Thatcher, personifised in the US by junk bond traders and Gordon Gecko types </li></ul></ul><ul><ul><li>Sell off of UK national assets such as BA, BP and BT. Role of business in society was hotly debated. As was US junk bonds fuelled asset stripping (Michael Milken, Al “Chainsaw” Dunlap ) </li></ul></ul><ul><ul><li>1980s also saw inner city riots in the UK and led to the creation of Business in the Community   </li></ul></ul><ul><ul><li>South Africa a big ethics issue in the 1980s, particularly for mining firms and Barclays </li></ul></ul>Lecture One: Introduction to CR
  7. 7.   <ul><li>Where does CR come from? </li></ul><ul><li>The 1980's </li></ul><ul><ul><li>1984 Union Carbide explosion in India pushed the chemical industry in the US and in Europe to adopt their &quot;responsible care&quot; initiative </li></ul></ul><ul><ul><li>Late 1980's Green groups grew in appeal across Europe </li></ul></ul><ul><ul><li>1989 European Elections the Green party took over 2 million votes and 15% of the vote share </li></ul></ul><ul><ul><li>Another watershed moment was the Exxon Valdez spill in March 1989. 10.8 million US gallons of oil were spilled off the Alaskan coast. This sparked international evironmental outrage </li></ul></ul><ul><ul><li>(Exxon fights the clean up costs lawsuits for 19 years, settled finally in 2010) </li></ul></ul>Lecture One: Introduction to CR
  8. 8.   <ul><li>Where does CR come from? </li></ul><ul><li>  </li></ul><ul><li>The 1990's  </li></ul><ul><ul><li>In the 1990s globalised labour practices as firms such as Nike and Gap on the agenda </li></ul></ul><ul><ul><li>Nike handles the initial reaction badly, fuelling critics. Media jumps on CSR, hard! </li></ul></ul><ul><ul><li>Labour activists from NGOs focusing on supply chains </li></ul></ul><ul><ul><li>Also in the 1990s Shell suffered double reputational blow in the North Sea and in Nigeria ( Brent Spar 1995, Ken Sawo-Wiwa in 1995-6) </li></ul></ul><ul><ul><li>Hugely significant for the development of CSR </li></ul></ul>Lecture One: Introduction to CR
  9. 9.   <ul><li>The 1990's - Other significant activities </li></ul><ul><li>  </li></ul><ul><ul><li>In 1995 The Body Shop published it's Values Report . Another CSR landmark </li></ul></ul><ul><ul><li>Naomi Klein - &quot;No Logo&quot;. in 1999/2000 </li></ul></ul><ul><ul><li>David Korten - &quot;When Corporations Rule The World“ </li></ul></ul><ul><ul><li>Anti-globalisation riots - Seattle in 2000 and Genoa in 2001 </li></ul></ul><ul><ul><li>In 2000/1/2 the CSR Agenda received a triple stimulus: </li></ul></ul><ul><ul><li>Jubilee 2000 Campaign on African debt </li></ul></ul><ul><ul><li>2002 Johannesburg Summit on Sustainable Development, </li></ul></ul><ul><ul><li>2001 scandal over HIV / Aids drugs distribution in Africa.  </li></ul></ul>Lecture One: Introduction to CR
  10. 10.   <ul><li>  China (2003/4/5) and the explosion of definitions… </li></ul><ul><li>  </li></ul><ul><ul><li>As China began to enter the world stage, debate begins about CR and SD </li></ul></ul><ul><ul><li>Issues: basic pollution management, anti-corruption and workers rights / health and safety </li></ul></ul><ul><ul><li>Chinese government quickly saw the potential for CR to be used as a control tool ( ACFTU ) </li></ul></ul><ul><ul><li>Resulting change in Chinese labour law has pushed up labour costs </li></ul></ul><ul><ul><li>Since 2003/4 the CSR scene has exploded - climate change, &quot;sustainability&quot; / corporate responsibility, supply chain risk, anti corruption, obesity marketing, human capital, marketing, etc </li></ul></ul><ul><ul><li>Myriad issues are now seen as relevant to CSR! </li></ul></ul>Lecture One: Introduction to CR
  11. 11.   <ul><li>CR around the world… </li></ul><ul><li>In  India , it often means working with NGOs, taking a philanthropic approach   </li></ul><ul><li>In  Colombia , it can mean helping with post conflict reconstruction and societal rebuilding  </li></ul><ul><li>In  South Africa , it can mean building up a supply base, that is both economically sustainable and worker-friendly – and helping tackle HIV / Aids.  </li></ul><ul><li>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  </li></ul><ul><li>In Ukraine , it can mean sponsoring church rebuilding, book publishing and encouraging basic skills improvements in the workforce, alongside health and safety </li></ul><ul><li>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. </li></ul>Lecture One: Introduction to CR
  12. 12.   <ul><li>  CR, Corporate Governance and &quot;new&quot; Governance </li></ul><ul><ul><li>Traditional CG views have emphasised the concept of Stewardship, Trusteeship (Goyder, Kay) </li></ul></ul><ul><ul><li>Traditional structures: Board values statements, exec education programmes, strategy meetings, reporting and committees </li></ul></ul><ul><ul><li>Stakeholders have targeted boards : ‘Fatcat’ pay, debates about director liablity for health and safety, overseas corruption etc </li></ul></ul><ul><ul><li>BUT ALSO…. </li></ul></ul><ul><ul><li>CSR and &quot; new governance &quot;. Much wider societal collaboration effort involving multiple parties tackling either broad or specific issues relating to governance (Amiram Gill) </li></ul></ul>Lecture One: Introduction to CR
  13. 13.   <ul><li>  CR, Corporate Governance and &quot;new&quot; Governance </li></ul><ul><ul><li>New governance: A whole different ballgame. Not an area directors of companies will generally get involved with! </li></ul></ul><ul><ul><li>Collaborative efforts to solve wider or specifically narrow problems: </li></ul></ul><ul><ul><li>E.G. Kimberly Process, Extractive Industries Transparency Initiative, Business Action for Africa </li></ul></ul><ul><ul><li>Gill (2008) looks at new governance as: &quot;encompassing both corporate self regulation and efforts by social groups to make this regulation more effective ( meta regulation )&quot;.  </li></ul></ul>Lecture One: Introduction to CR
  14. 14. So what is modern CR? <ul><ul><li>CSR can really be discussed as separate areas for a business… </li></ul></ul><ul><ul><li>Corporate governance and access to capital </li></ul></ul><ul><ul><li>Human capital management: Getting better people and keeping them </li></ul></ul><ul><ul><li>Doing business honestly – effective measures against corruption </li></ul></ul><ul><ul><li>Improving community relationships and building a bank account of trust </li></ul></ul><ul><ul><li>Communicating well with consumers , and treating them right </li></ul></ul><ul><ul><li>Better environmental and social risk management </li></ul></ul><ul><ul><li>Cost savings via environmental efficiencies </li></ul></ul><ul><ul><li>Better relations with governments , at home and abroad </li></ul></ul><ul><ul><li>A great way to find new opportunities for products and services </li></ul></ul><ul><ul><li>VIDEO Stakeholder theory: (19-24mins) </li></ul></ul><ul><ul><li>“ Opportunity” Examples include: BP, Unilever, Marks and Spencer, Nike, Waitrose, Timberland, Cadbury, Sky, and many others </li></ul></ul>Lecture One: Introduction to CR
  15. 15. The landscape going forward <ul><ul><li>Increasing legal/ regulatory pressures : </li></ul></ul><ul><ul><ul><li>Anti-corruption, </li></ul></ul></ul><ul><ul><ul><li>Maybe later on human rights (John Ruggie’s final report in June 2011) </li></ul></ul></ul><ul><ul><ul><li>Financial regulation and social pressure on large companies! </li></ul></ul></ul><ul><ul><li>Expectations increasing: </li></ul></ul><ul><ul><ul><li>Increasingly impossible not to be engaged with communities </li></ul></ul></ul><ul><ul><ul><li>Governments realise their limitations, change procurement rules </li></ul></ul></ul><ul><ul><li>Consumer choices: </li></ul></ul><ul><ul><ul><li>Evidence that consumers increasingly interested, niche going mainstream </li></ul></ul></ul><ul><ul><li>Business-to-Business: </li></ul></ul><ul><ul><ul><li>Will be required as part of product/ service specifications </li></ul></ul></ul>Lecture One: Introduction to CR
  16. 16. Significant global responsible business initiatives - Some pros and cons <ul><ul><li>UN Global Compact / UN PRI – Get CEOs signed up, but lack real teeth – and bite! </li></ul></ul><ul><ul><li>Global Reporting Initiative – Useful place to start, danger of reliance on box ticking </li></ul></ul><ul><ul><li>John Ruggie’s work – Likely to impact business lobbying on better governance in future </li></ul></ul><ul><ul><li>Carbon Disclosure Project – increased information for regulatory powers to use. May be more useful for legislation purposes than for carbon traders </li></ul></ul><ul><ul><li>EITI / Kimberly – Case studies of real success but hard to replicate in areas where issues are more complex </li></ul></ul><ul><ul><li>ISO 26,000 – very hard to standardise subjective issues for business! </li></ul></ul><ul><ul><li>Issue specific collaborations : Rainforest Alliance / Fair trade / cocoa / fish / timber / palm oil / soy / cotton / labour standards – incredibly influential in terms of policy and even tier 1 supplier concerns </li></ul></ul>Lecture One: Introduction to CR
  17. 17. <ul><li>Some current “macro drivers” of the modern, public corporate responsibility debate: </li></ul><ul><li>The tax justice debate: UKUncut and TopShop, Vodafone, Alliance Boots etc </li></ul><ul><li>Bankers bonuses : Barclays, Lloyds, RBS, HSBC protests and news items </li></ul><ul><li>Unequal pay : CEO’s of UK’s largest companies earned 81 times the average pay of full-time workers in 2009. Up from 47 times in 2000. </li></ul><ul><li>In the USA top CEOs in 2008 earned 319 times more than the average worker. </li></ul><ul><li>Income inequality in the US is at its highest since 1929, similar to other leading English-speaking economies. </li></ul><ul><li>Pay ain’t it used to be: “The original JP Morgan, no paragon of corporate virtue and the most successful banker in history believed that no CEO should earn more than 20 times the wage of his lowest paid employee”. (The Week / Income Data Services, 15/01/11) </li></ul><ul><li>Youth unemployment in Europe is high! 20% and above in many nations (UK, Spain) </li></ul>Lecture One: Introduction to CR
  18. 18. Further reading: <ul><li> </li></ul><ul><li> </li></ul><ul><li> </li></ul><ul><li> </li></ul><ul><li> </li></ul><ul><li> </li></ul><ul><li> </li></ul><ul><li> </li></ul>
  19. 19. Further watching: <ul><li>The Story of Stuff Project: (Consumerism/Greenwash) </li></ul><ul><li> </li></ul><ul><li>Dan Pink, What Motivates us? (Purpose/Values) </li></ul><ul><li> </li></ul><ul><li>Potholer54 on YouTube: (climate science) </li></ul><ul><li> </li></ul><ul><li>Naomi Klein: Addicted to Risk : (Precautionary principle) </li></ul><ul><li> </li></ul>
  20. 20. Further listening: <ul><li>Getting a new CEO on board: </li></ul><ul><li> </li></ul><ul><li>Companies and water sustainability: </li></ul><ul><li> </li></ul><ul><li>Kraft UK’s boss on sustainability: </li></ul><ul><li> </li></ul><ul><li>Greenpeace on CSR and sustainability: </li></ul><ul><li> </li></ul><ul><li>Jeffrey Hollender to why we need a revolution in thinking: </li></ul><ul><li> </li></ul><ul><li>Sustainability strategy at Marks & Spencer : </li></ul><ul><li> </li></ul>