Role and legitimacy of the company: from Friedman to Porter Challenges and tools of the Sustainable Development The Corporate Social Responsibility project: changing the corporation to make development more sustainable Definitions of CSR: from DJSI to European Union and ISO 26000 ISO 26000CSR Strategies: from Legal Compliance to Radical Militantism: the Virtue Matrix

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CORPORATE SOCIAL RESPONSIBILITY
& BUSINESS ETHICS
Session 1: Facing the Sustainability
challenges: Corporate Social Responsibility
François MANGIN
2015-2016

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Session 1
Facing the Sustainability challenges:
Corporate Social Responsibility

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Course learning objectives
By the end of this course, students are expected to be able to:
 Distinguish between CSR, Sustainable Dvlpt (SD) and Ethics
 In a given situation, identify the stakeholders, analyze their stakes,
positions, and resources and to propose a engagement strategy
 Present and explain the major tools and frameworks used to
implement more responsible and sustainable ways of doing
business
 Make a CSR/SD diagnosis of a company in its industry and propose
the major lines of an action plan
 Explain the new sustainable and responsible Business Models
 Use a thoughtful approach to dealing with unethical situations in
business;
 Present the key CSR issues currently on the national and
international agenda ;
 Critically assess companies’ CSR strategies and outcomes

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Course schedule
1. The responsibilities of Business towards Society, and
Sustainable Development
2. Stakeholders, controversies and lobbying
3. Simulation
4. Labor conditions
5. Consumer issues and Fair operating practices
6. Ethics: how to face unethical situations
7. Environmental impact and Eco-design
8. Sustainable and responsible Business models
9. The challenges of developing less developed countries
10. Simulation

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Session 1
Facing the Sustainability challenges:
Corporate Social Responsibility

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Session 1 Learning objectives
By the end of the session, each student is able to::
 Situate CSR in the history of Business and Society
relationships
 Explain the political and legal components of Sustainable
Development
 Explain how CSR is linked to Sustainable Development
 Explain the differences between European and American
visions of CSR
 Present the areas where the responsibility of a company can
be engaged
 Explain the CSR Business Case
 Use a Virtue Matrix to position and qualify the CSR/SD policy
of a company or a industry

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Introductory Case Study
Who are the stakeholders?
What are their stances and on
which grounds do they defend
them?

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Stakeholders
Vedanta
Orissa Government
Local Communities
Indian government
NGO
Medias
OCDE
« Peoples »
Indian Supreme Court
Shareholders
CSR Rating Agency
Investors
Financial press

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Worth to note:
• Non-economic impacts
• Activist groups and supporters
• Complaint filed before OCDE NCP
• Legal actions
• Involvement of financial institutions
– CSR research & rating agency
– Responsible Investors
Project withdrawal

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Session 1 outline
1. Business in Society: a increasingly challenged
legitimacy
2. Sustainable Development: challenging the established
decision-makers
3. Corporate Social Responsibility: changing the
corporation to make development more sustainable
4. Areas of Corporate Social Responsibility
5. Corporate CSR policies

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1
Business in Society:
a increasingly
challenged legitimacy

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1970: Milton Friedman
The manager is the agent of the individuals who own the
corporation
His unique responsibility is to make as
much money as possible while conforming to the law
and to the ethical custom.
He has no expertise nor legitimacy to take decision in
other fields than running his company
Social Responsibility is the responsibility
of the government
Responding to CSR demands from pressure groups
that didn’t succeed in electoral competition
would be non democratic

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North American approach (Carroll)

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Recent illustration
• Annual General Meeting 2011
• CEO de Margerie answers a question on the Joslyn tar
sands field in Alberta (Canada) asked by an Athabasca
Chipewyan first nation representative
• Link

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The capitalist system
is under siege.
In recent years business increasingly has
been viewed as a major cause of social,
environmental, and economic problems.
Companies are widely perceived to be
prospering at the expense of the broader
community.
The legitimacy of business has fallen
to levels not seen in recent history.
2011: Michaël Porter

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Synthesis:
• CSR origins lie in the USA where some questions
arose about the missions of the corporation and of its
executives.
• But the US tradition restricted the corporate social
engagement to voluntary philanthropic activities.
• Criticisms against the negative impacts of corporate
operations threat its legitimacy and put pressure on
this too limited approach.

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2
Sustainable Development:
challenging the established
decision-makers

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Global challenges
Micro-level
causes

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2020
Causes of the unsustainable
development?
No consideration of the long-term
and distant impacts of decisions
Accounting
Finance
No consideration of
the advocates of the
interests affected by the
unsustainable development
Lack of transparency

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Sustainable
Development
Development that balances economic, social and
environmental stakes and thus preserves the future
of the future generations by:
• Implementing new ways of making decisions by
addition of non-economic criteria and by
engagement with new stakeholders
• Increasing the accountability of decision-makers
by organizing data transparency as well as by
modifying the legal environment to allow the
prosecution of decision-makers

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Stakeholder
A person, group, organization:
• whose interests are affected
by the decision
• that has an influence on the
decision-making process

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Rio Declaration
Participative and
transparent decision
making process
Risk analysis
Impact studies

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Rio Declaration
Implement
legal Frameworks
3 Principles
– Responsibility
– Precaution
– Polluter Pays

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Precautionary
Principle
The lack of sound scientific data,
considering the present state of art, should
not delay the adoption of effective and
proportionate measures aiming at risk
prevention against environmental, health or
nutrition hazards.

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Polluter Pays
Principle
Those who produce negative
externalities should bear the costs of
managing them to prevent damage to
human health or the environment.
Defined by OCDE in 1972
Part of UE Treaties (1987)

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Synthesis:
• SD is not just a call to preserve the environment
and the future generations
• It promotes the ways and means to achieve it :
• A political change in the decision-making processes
of companies, local and national governments.
• An enlargement of the decision-makers liability by
increasing transparency and easing prosecution
• [It recalls the right of the South to pursue its
development too].

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3
Corporate Social Responsibility:
changing the corporation
to make development more
sustainable

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To achieve sustainable
development, a top
priority:
Involve the business
(in the whole world)!

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Legal levers
(hard law & soft law)
Obligations
Interdictions
Liabilities and indictments
Decision criteria &
Decision making pocesses
Governance

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Soft law
instruments (guidelines, codes of conduct)
which :
• Aim to modify or to guide behaviors by the
voluntary adhesion of the participants ;
• Do not have any legally binding force and do
note create legal rights or obligations;
• Are elaborated and designed in a formalized
way, very similar to the process used for the
rules of law.
From French Conseil d’État, Étude annuelle 2013

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From the soft to the hard law
Legal
Obligation
JurisprudenceIndividual
Pledge
Voluntary
adhesion to a
Pact or
Covenant
Voluntary
Frameworks &
Guidelines

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Hard law & soft law: an example
CSR/SD Reporting
Publishing the CSR/SD impacts and
the actions to prevent and to attenuate them
Mandatory for the large then the
middle-sized companies… but no
prescription of specific guidelines
to do it
Ruled mandatory by the EU…
since 80% of the targeted companies
still willingly do it

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Economic
levers
Modify prices
Taxes
Create New Markets
Subsidizes
Public Investments

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Innovations
Management
tools
Technologies
Business Models

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Visions of CSR
Definition
Core issues
Means for action
Legal enforcement?
National law?
Treaties and International
Principles & Declarations?
Frameworks
Guiding actions
Comparing outcomes

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What is CSR?
• “Corporate Sustainability is a business approach that
creates long-term shareholder value by
embracing opportunities and managing risks deriving
from economic, environmental, and social
developments.“
• CSR is a guiding vision that can help companies
maintain their license to operate in an increasingly
globalized world.
• d

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What is CSR?
• CSR is the continuing commitment by business to
contribute to economic development while improving the
quality of life of the workforce and their families as
well as of the community and society at large.
• “A sustainable business is one that delivers value for
investors, customers, and employees; improves the
living standards of its employees and the
communities it touches; makes wise use of
natural resources; and treats people fairly.”
• d

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European approach of CSR
« the responsibility of enterprises for their impacts
on society »
European Commission, 2011
“Being socially responsible means not only fulfilling
legal expectations, but also going beyond
compliance and investing “more” into human
capital, the environment and the relations with
stakeholders”
European Union, 2001

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Corporate Social
Responsibility
A process driven in close collaboration with the
stakeholders,
To integrate social, environmental, ethical, human
rights and consumer concerns into their business
operations and core strategy, with the aim of:
• maximizing the creation of shared value for their
owners/shareholders and for their other stakeholders
and society at large;
• identifying, preventing and mitigating their
possible adverse impacts

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International
Conventions & Agreements
between signatory states
Guidelines for
the Business

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Standard ISO 26000
Mandatory further reading on Moodle
"Mieux comprendre la norme ISO 26000" in: Lecomte & Adary:
L’ISO 26000 en pratique : Faire de la responsabilité sociétale un
levier de performance pour l’entreprise , Dunod, 2012
• First international framework proposed for the design and
implementation of the corporate CSR/SD policy
• A voluntary and non certifiable standard
– No certification by a third party certification body
– Preventing the risks of CSR/SD-based trade discrimination
(towards Southern countries products & services)

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Corporate social
responsibility
The responsibility of an organization for the impacts of
its decision and activities on society and the
environment, through transparency and ethical
behavior that:
• Contribute to sustainable development, including
health and welfare of society
• Takes into account the expectation of stakeholders
• Is in compliance with applicable law and
consistent with international norms of behavior
• Is integrated throughout the organization and
practices in its relationship

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Synthesis:
• CSR is the lever used to change and transform
business practices towards more sustainability
• CSR expectations are more or less demanding
depending the country and its national culture
regarding Business & Society
• Even if the soft law approach is still dominant, legal
constraints increase:
• Criminal and civil liability (scope, fines & damages)
• Accountability requirements

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4
Areas of Corporate
Social Responsibility

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Principles & Methodology
• Accountability
– being answerable for decisions and activities and their
impacts on society, the economy and the
environment
– to the organization's governing bodies, legal
authorities and, more broadly, its stakeholders
• Defining the Scope of action
– Explicit the specific CSR of the company
– Identify company’s stakeholders and sphere of
influence

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Sphere of influence
« Area where, by its political, contractual
or economic relationships, a company is
able to affect the decisions or activities
of companies, organizations or
individuals. »
Area of power: the company's ability to guide
the behavior and the activity of other actors,
without jeopardizing their legal autonomy

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Human rights
Labour
Environment
Anti-corruption
Human rights
Labor Practices
Environment
Society
Economic
Products
Human rights
Labor Practices
Environment
Community involvement
Consumers
Operating practices
Governance
A larger and larger scope…

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… that gets very specific
Consumers

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… and requires more and more
accurate and quantitative data
Society

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Case: impacts et influence of large retailers
Human Rights
Labor conditions
Environment
Communities
Consumers
Operating practices
Governance

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Synthesis:
• CSR is not simply about environmental management
and philanthropy.
• The whole company is impacted, including its core
business activities.
• Its responsibility can extend as far as the influence
that the company can exert on other companies and
other organizations.

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5
Corporate
CSR policies

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CSR impacts on the company
OpportunitiesThreats
Protests against
business practices
Lawsuits, Fines
& Damages
New constraints
Costs increase
New segments &
markets
Differentiation
/competitors
New
Business Models
Sales increase and
lower costs

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Compliance
• Meeting new constraints
• Managing new risks
Commitment
• Reducing externalities
• Creating new sustainable
and responsible markets
and business models
Two perspectives

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Compliance
Commitment
Up to what level?
At what cost?
… For all competitors?

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Level playing field
Situation where all the competitors are playing
by the same set of rules, with equal
opportunities and constraints.
• Eliminate the risk of social or environmental
« dumping » by competitors not subjected to
the same rules and constraints
• Prevent unfair competition

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Business Case
Documented argument that
justifies the company’s involvement
in a project
• Cost of investment
• Operating costs
• Expected benefits and returns

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Top 3 reasons for CSR

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The CSR Business Case
Image
& Réputation
Consumers and purchasers
Employees and applicants
Investors
Local and national government
Business
B to B (responsible purchasing)
B to C (responsible consumers)
Green Business
Risque
Anticipating new risks, complaints and jurisprudences and
regulations
License to operate
Finance
Better risk management
Attracting responsible investors
Competitive
Advantage
Innovation aimed towards rupture, reconfiguration,
efficiency and frugality
Differentiation and strategic shift

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The CSR Business Case
Mandatory further readings on Moodle
Interview de Paul Polman, CEO Unilever, sur le
changement climatique.

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Stakes and
Impacts
Assessment
Choice of areas
for action
Projects
Objectives
Indicators
Implementation
Control and
Outcomes’
Measurement
Communication
and CSR
Reporting
The strategic process
Stake-
holders
Stake-
holders

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A responsible retailer?
Vidéo
Mandatory further readings on Moodle
Interview de Serge Papin, PDG Système U sur les
enjeux RSE de la grande distribution.

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The company and its CSR: The Virtue Matrix
Rational Commitment Radical Activism
Social mimetism Legal ComplianceRisk
management
Commitment
Martin R (2002) : "The Virtue Matrix: Calculating the Return on Corporate Responsibility".; HBR

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Why using the Virtue Matrix?
To analyze and position CSR strategies
• Position at a given time
– For a company
• Position the CSR policy for each ISO 26000 core issue
• Position the CSR policy for each country where the firm is
operating
– For an industry
• Position the industry’s competitors
– For a CSR/SD issue or for a country
• Position each company, each industry or each core issue
• Dynamics of positions
– Companies or industries
– CSR/SD actions/tools: from commitment to compliance

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CSR/SD policies positioning
Rational Commitment
Social Diversity
Eco-design
Psychosocial risks
Dialogue with NGOs
Radical Activism
Production relocalization
Responsible Supply Chain
Human Rights
Sustainable Business Models
Social Imitation
Disabled employees
Carbon emission assessment
Gender Equaility
Green sponsoring
Legal Compliance
Workplace safety
Illegal employment
Environmentally-sensitive
facilities
Risk
management
Commitment

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Trivialization and Regulation
Rational Commitment Radical Activisme
Social imitation Legal ComplianceRisk
management
Commitment

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Synthesis:
• Facing CSR/SD challenges, a company can choose
different positionings on each issue, considering the
specificities of its industry and its operational
activities.
• A genuine CSR/SD policy is based on:
• a strong commitment on major CSR/SD issues
• an actual dialogue with stakeholders
• Feedback and corrective loops in case of CSR/SD
dysfunction or alert