"CSR as a core business strategy" - masterclass by John Holm at MSM Romania

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John Holm's presentation at Maastricht School of Management Romania on the 11th of September on "CSR as a core business strategy. Enriching both the local community and the bottom line"

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"CSR as a core business strategy" - masterclass by John Holm at MSM Romania

  1. 1. www.msmromania.orgfacebook.com/msmro @msmromania
  2. 2. Changing The Conversation…. CommunityMaastricht School of Management Romania www.msmro.org
  3. 3. Food For Thought… “No Social program can rival the business sector when it comes to creating jobs, wealth, and innovation that improve standards of living and social conditions over time. Any business that pursues its ends at the expense of society will find its success to be illusory and ultimately temporary” Michael Porter – H.B.R. – Strategy & Society December 2006Maastricht School of Management Romania www.msmro.org
  4. 4. Food For Thought… “Businesses will often be far more effective than governments and nonprofits are at marketing activities that motivate customers to embrace products and services which create societal benefits, like healthier food or environmentally-friendly products.” Michael Porter & Mark Kramer – H.B.R. – Creating Shared Value January-February 2011Maastricht School of Management Romania www.msmro.org
  5. 5. The Demand For Market Virtue“Few firms have been rewarded orpunished by the financial markets for theirsocial performance” Demand for Market Virtue Pg.73Maastricht School of Management Romania www.msmro.org
  6. 6. Getting Back To The Basics…. What exactly is Corporate Social Responsibility? Why do companies undertake CSR Initiatives? How do they measure success? How is CSR communicated/promoted internally among employees? Among leadership? How can CSR have a negative impact on my bottom line?Maastricht School of Management Romania www.msmro.org
  7. 7. And Defining Relevancy Which NGOs should For-Profits choose to collaborate with and why? Non-Profits and ethics…Where are the boundaries? If profits fall, will CSR Initiatives be the first to be cut?Can CSR Initiatives be profitable?Maastricht School of Management Romania www.msmro.org
  8. 8. The Four Key Myths of CSR Myth 1 "The ethical consumer will drive change.” Deborah Doane – “The Four Key Myths of CSR” Stanford Social Innovation Review, Fall, 2005Maastricht School of Management Romania www.msmro.org
  9. 9. The Four Key Myths of CSRMyth 2"There will be a competitive race to the top over ethics amongst businesses.” Deborah Doane – “The Four Key Myths of CSR” Stanford Social Innovation Review, Fall, 2005Maastricht School of Management Romania www.msmro.org
  10. 10. The Four Key Myths of CSRMyth 3"In the global economy, countries will compete to have the best ethical practices." Deborah Doane – “The Four Key Myths of CSR” Stanford Social Innovation Review, Fall, 2005Maastricht School of Management Romania www.msmro.org
  11. 11. The Four Key Myths of CSR Myth 4“The market can deliver both short-term financial returns and long-term social benefits” Deborah Doane – “The Four Key Myths of CSR” Stanford Social Innovation Review, Fall, 2005 This myth can be ‘debunked’ in Romania as the case study will illustrateMaastricht School of Management Romania www.msmro.org
  12. 12. The Key Question…In what conditions does it appear to makebusiness sense to implement CSR?Maastricht School of Management Romania www.msmro.org
  13. 13. Category 1 CSR is part of the company’s corporate strategy and business identity. Ex. Patagonia, Starbucks, C&A, Ikea, MerckMaastricht School of Management Romania www.msmro.org
  14. 14. Category 2 Firms that have been targeted by activists for the visibility of their brands and are highly defensive and risk-averse. Ex. Shell, Nike, McDonalds, and CarrefourMaastricht School of Management Romania www.msmro.org
  15. 15. The Main Business Stakeholders What are the foundations for the business case of CSR? • Consumers • Employees • InvestorsMaastricht School of Management Romania www.msmro.org
  16. 16. The Demand For Market Virtue The Investor Two issues must happen to effectively measure how corporate performance affects share price….Maastricht School of Management Romania www.msmro.org
  17. 17. The Demand For Market Virtue The Investor 1. Provide verifiable information about their social and environmental performance in a form that is comprehensible and relevant to mainstream investors Ex. Triple Bottom Line??Maastricht School of Management Romania www.msmro.org
  18. 18. The Demand For Market Virtue The Investor 2. Investors must take social impact into account before making business decisions Short- term pain but long-term pain not yet proven ex. Reebok labor policies better than NikeMaastricht School of Management Romania www.msmro.org
  19. 19. ‘Business-As-Usual’ CSRMaastricht School of Management Romania www.msmro.org
  20. 20. ‘Business As Usual’ CSR PNL budgetary item that gets in the way of profitability? A PR Opportunity/Photo Op with no value add to core business? Extra salary and payroll in times of economic uncertainty?Maastricht School of Management Romania www.msmro.org
  21. 21. Over-Promising…. http://www.brandweek.com/bw/content_display/news-and- features/direct/e3ieedb56d6b7d31495787a33374c63794bMaastricht School of Management Romania www.msmro.org
  22. 22. And Under-Delivering…. http://www.greenpeace.org.uk/blog/climate/bps-wins-coveted-emerald-paintbrush-award-worst- greenwash-2008-20081218Maastricht School of Management Romania www.msmro.org
  23. 23. And the result… http://www.suite101.com/content/bp-goes-from-beyond-petroleum-to-big-polluter-in- csr-setback-a235924Maastricht School of Management Romania www.msmro.org
  24. 24. Or Strategic CSR…Maastricht School of Management Romania www.msmro.org
  25. 25. Or is it Strategic CSR? A Competitive advantage among your evoked set that sets you apart? A ‘positive’ emotional connection to your core consumer? A part of your core business strategy that keeps employee morale high thus lowering turnover… and expenses? A tool that provides innovation and opens new markets…and improves the bottom line?Maastricht School of Management Romania www.msmro.org
  26. 26. Strategic CSR Value Proposition - Best Price / Best Deal  Low cost is the core business  Every year IKEA plans to cut 3%-5% of its cost • Re-design products • Overhaul manufacturing techniques • Shortening supply chains Bang Mug Example  Design made mug shorter and more stackable  Mugs per pallet from 864 to 2,024 • Shipping costs dropped 60%Maastricht School of Management Romania www.msmro.org
  27. 27. Strategic CSR How vital is sustainability and an eco- friendly attitude to IKEA? U.S. locations are aiming to reclaim 90% of store waste by the end of 2012  Increased energy efficiency by as much as 20% by lighting, heating, and cooling systems facilities New locations  Access to ports or strong rail corridors  Often qualify for brownfield redevelopment credit  Ocean and rail are some of the least carbon intensive shipping optionsMaastricht School of Management Romania www.msmro.org
  28. 28. IKEA and the WWF - Why? International leader in responsible forest management One of the largest consumers of forest product  Risk of illegal wood coming into the Supply ChainSupplier Code of Conduct  Compliance is only at 50%  Only 4% in China  Boosted the number of unannounced audits to its suppliers and tightened standards for resource use and labor practicesMaastricht School of Management Romania www.msmro.org
  29. 29. Asking the right question…The essential test that should guide CSR initiatives is not whether a cause is worthy but whether it presents an opportunity to create shared valueMaastricht School of Management Romania www.msmro.org
  30. 30. Prioritizing Social Issues Social Issues of Generic Social Value Chain Competitive Issues Social Impacts Context Social Issues Social Issues that Social issues that are not significantly that are significantly affect the significantly affected by a company’s affected by a competitiveness company’s company’s in the locations long-term activities where it operates operationsMaastricht School of Management Romania www.msmro.org
  31. 31. ExamplesCarbon Emissions might be generic social issue for Banca Transilvania (Financial Services) but a value chain impact and competitive issue for both IKEA and Dacia RenaultThe impact of Malaria in Africa may be a generic social issue for Brico Store but a value chain impact for Glaxo Kline Smith and a competitive issue for Anglo American Mining Company (labor)Maastricht School of Management Romania www.msmro.org
  32. 32. Responsive and Strategic CSR Corporate Involvement in Society – A strategic approach Social Dimensions Generic Social Value Chain of Competitive Impacts Social Impacts Context Strategic Mitigate harm from philanthropy that Good citizenship value chain activities leverages capabilities to Transform value improve salient chain activities to areas of competitive Responsive CSR benefit society while context reinforcing strategy Strategic CSRMaastricht School of Management Romania www.msmro.org
  33. 33. Directly Influencing the Bottom Line: Purchase BehaviorPositive Link between CSR and Purchase:The consumer supports the issue central to the company’s CSR effortsWhen the social issues align with the company’s strategyWhen the consumer is not asked to pay a high price for Social ResponsibilityPrice and QualityMaastricht School of Management Romania www.msmro.org
  34. 34. The Consumer…It’s Complicated More than 75% of US consumers report that they would avoid purchasing products made under poor working conditions However… Half of US consumers thought it was the responsibility of business and not themselves to do more to protect the environmentMaastricht School of Management Romania www.msmro.org
  35. 35. Is the Romanian Consumer Naïve?șmecher• (slang) An individual who can handle any kind of situation, that is always on top of things, is cunning, is intelligent, is street-smart is slick, is a wiseguy. Somebody calm, crafty or deceitful who never backs down.• (slang) someone who makes "easy money" or a lot of money usually by illegal or questionable means but necessarily without hard work.• slick, wiseguyMaastricht School of Management Romania www.msmro.org
  36. 36. The Consumer – The Methodology Identify the key demographic/psychographic consumer segments that would be most influenced by CSE Strategies.Maastricht School of Management Romania www.msmro.org
  37. 37. Actualizers  For them the most important in life is to ‘leave a mark’ create something enduring  Family & friends oriented • Enjoys spending time with the family • Enjoys entertaining people at home  Actualizers are more active than the life stage average • They often go out to cinema, restaurants and theater • They are interested in arts, listen to music and read booksConsumption  Their consumption is characterized by the use premium of brands and a large variety of different ones  Prefer organic food Source: Garrison GroupMaastricht School of Management Romania www.msmro.org
  38. 38. Balancers Trying to balance work and private life priorities • They are very concerned about providing quality time for the family  Entertainment and socializing typically includes the whole family  In raising their children they are liberal, but consistent  In their career they are striving and disciplined Positive thinking - satisfied with their lives Concerned about arts and creativity • They read a lot and listen to music • Balancers more modern and open-mindedConsumption  Their high standard of living enables them to buy high quality brands, and stick to them - brand loyal  They are more spontaneous purchasers than average Source: Garrison GroupMaastricht School of Management Romania www.msmro.org
  39. 39. Libri Book Chain Market Entry 2007  Established a precedent of an international book chain successfully moving from one publishing language to another by expanding into the Romanian market  Hungary’s largest ‘specialty’ book retailer garnering Super-Brand Status two consecutive years • archive.superbrands.hu/konyv_2005/pdf/libri.pdf  Hosting renowned authors such as Salman Rushdie • http://www.muvesz-vilag.hu/irodalom/hirek/6878Maastricht School of Management Romania www.msmro.org
  40. 40. Why Romania? The New ‘Golden Child’  Over 100 Malls in planning phases in the next 5 years (2008- 2013)  Only one specialty book chain with 3 stores in 2007  The largest book retailer with 71 stores also sold electronics, kids toys, music, and paper products  Only 17% of the public bought at least one book in 2006 compared to 54% in the United States and 82% in Hungary displaying ENORMOUS growth potentialMaastricht School of Management Romania www.msmro.org
  41. 41. Romania - Market Entry Obstacles Cultural Hurdles: • Hungarian retail chain entering Romanian publishing community • Language adaptation and identification with Romanian consumer Business Hurdles: • Supply Chain – HQ in Cluj-Napoca • In 2007, Romania ranked last of all EU countries in transparency  http://www.transparency.org/policy_research/surveys_indices/cpi/2007Maastricht School of Management Romania www.msmro.org
  42. 42. Libri Romania Passion for Books, Passion for People Transparency as a Value Proposition Employees Community Shared Multicultural No sense of Multiethnic „sub masa” community Industry-first 12 Gifts of consignment D.E.A.R Christmas contractMaastricht School of Management Romania www.msmro.org
  43. 43. Little People/Temerarii 2007 Founded in 1996 in Cluj-Napoca with current offices in Bucuresti, I asi, and Timisoara Collaboration with all 12 Children Oncology Wards in Romania focusing on outreach programs 76 Oncology volunteers (highly trained) 194 Cancer survivors as volunteer patient advocates 104 Corporate VolunteersMaastricht School of Management Romania www.msmro.org
  44. 44. Little People/Temerarii 2007 Business Partnerships Community Partners Danone Romania British Embassy E-On Gaz Romania Romanian National Theatre PWC Hungarian National Starbucks Theatre Libri Book Chain Cluj and Timisoara Town MOL and PETROM Halls Various Special Education Inst.Maastricht School of Management Romania www.msmro.org
  45. 45. Step 4 – Identifying The Consumer The Consumer Business to Business to Consumer Community Demographic Psychographic Babes Public CEU Targets Targets* Bolyai Schools Mothers Teachers Balancers Actualizers Source: Garrison GroupMaastricht School of Management Romania www.msmro.org
  46. 46. Business To ConsumerDemographic TargetFamilies/Mothers with expendable incomePreferred loyalty card holdersTeachersMaastricht School of Management Romania www.msmro.org
  47. 47. Business To ConsumerPsychographic Targets*ActualizersBalancersC.S.R. Social Issue/Value Platform are directlycorrelated to these two targets. Source: Garrison GroupMaastricht School of Management Romania www.msmro.org
  48. 48. Business To CommunityDirect sales to many public schools receiving public funds to build libraryDirect sales to Central European University sharing the same value platformExclusive collaboration with…Maastricht School of Management Romania www.msmro.org
  49. 49. Babes-Bolyai UniversityMaastricht School of Management Romania www.msmro.org
  50. 50. The Strategy & Implementation….Change the Conversation…Maastricht School of Management Romania www.msmro.org
  51. 51. Libri Romania Passion for Books, Passion for People The Results Year to Year ComparisonDec.2007=344 548 Dec.2008=527 567Jan.2008=167 379 Jan2009=264 369Feb.2008=171 837 Feb.2009=217 113 Net Year to Year Revenue Increase 683 864 RON of 52,3% 1 009 049 RONMaastricht School of Management Romania www.msmro.org
  52. 52. CHANGE THE CONVERSATION!!!!!!  WHO – Who are your customers and are they going to be receptive to your C.S.R. initiatives?  WHAT – What is your value proposition and how is C.S.R. related to your core business?  WHEN – When did your direct competition begin launching CSR initiatives and how often do you run CSR competitive diagnostics?  WHERE - Where are the areas that your company can create a win- win situation for both community and bottom line?  WHY – Why are you investing in C.S.R. initiatives if you cannot deliver what you are promising?Maastricht School of Management Romania www.msmro.org
  53. 53. Mulţumesc pentru atenţia acordată! John Holm | TRANSNATIONAL PERSPECTIVES jholm@tpgroup.eu Twitter: transnational_1 Skype: tpgroup.euMaastricht School of Management Romania www.msmro.org

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