Attend WCQI 2017 for Innovative Quality presentations

T16 Cost of Social Responsibility Model:
Control Risks and Profits
Daniel Zrymiak (Accenture), ASQ Fellow
Tues. May 2, 2017
WCQI 2017

Cost of Social Responsibility Inspiration
The Cost of Social Responsibility Model is
inspired by the iconic Strategy and Society
article by Porter and Kramer (paraphrased below)
Using the same frameworks that guide their core
business choices, organizations will discover,
Corporate Social Responsibility can be a
potent source of innovation and competitive
advantage.
• Identify the social consequences of actions;
• Determine which CSR initiatives to address;
• Find the most effective ways.
________________________________________________________
Daniel Zrymiak (Accenture): ASQ Fellow
Cost of Social Responsibility Model: Control Risks and Profits – WCQI 2017

Cost of Quality Model - Benchmark
Start with the traditional Cost of Quality Model:
• Justifies Return on Investment of Quality-related activities.
• Cost of Quality assumes a finite scope and optimal Quality Cost
levels (based on diminished returns)
________________________________________________________

Cost of Social Responsibility Model
Define a CoSR Model that extends beyond
CoQ Model traits:
- Failures: Internal, External,
Nonconformance
- Appraisal: Test, Inspection, Audit,
Assessment
- Prevention: Systems, Training,
Knowledge Management
Focus on additional costs, aspects, and
impacts extending beyond the enterprise to
include Social Responsibility principles.
Scope extends beyond traditional
boundaries of Quality organization, requiring
more extensive cost model.
SR Principles Impacts
Accountability Governance across all
levels and functions
Transparency Visibility of decisions
and outcomes
Ethical Behavior Rationale and basis
for practices
Stakeholder Organization,
employees, financiers,
vendors, customers,
users, community
Rule of Law Adherence to legal
and regulatory
framework
International
Norms
Abide by treaties and
memorandum of
understanding
Human Rights Protection and
safeguarding of rights
________________________________________________________

Risk Management approach goes beyond
conventional approaches to Corporate
Social Responsibility:
- Friedman – “make as much money as
possible”
- Contributions to community and
charitable causes (Good Works)
Risk Mitigation mindset should avoid and
prevent unplanned costs associated with
Socially Irresponsible maladies and
catastrophes.
SR Core Subjects Owner
Organizational
governance
ISO 9001
Quality
Human rights HR
Legal
Labor practices HR
Legal
Safety
Environment ISO 14001
Fair operating practices Legal
HR
Consumer issues Marketing
Legal
Community involvement
and development
CSR
________________________________________________________

Cost of Social Responsibility Overview
Overview of Social
Responsibility Cost
Categories
Application of SR Costs for
Past and Present
Examples
Projected consideration of
SR Costs for a Future
industry
________________________________________________________

CoSR Components
Cost of Social Responsibility
Categories
- Extended Monitoring and
Reporting
- Governance
- Oversight
- Mitigation and Contingencies
- Treatment, Recovery, and
Remediation
- Advocacy
- Adoption
CoSR purpose is to reduce the
portion spent on Treatment,
Recovery and Remediation________________________________________________________

CoSR: Extended Monitoring and Reporting
Track the SR impacts of each SR aspect associated
with the business or organization to address
Accountability and Transparency.
Aspects include those pertaining to:
- Organization or enterprise
- Immediate customers, supply chain
- Industry, profession, or economic sector
- Stakeholders, communities, regions
- Society at large
Impacts, from incidents, malicious acts, or negligence:
- Objective measure of SR Aspect in financial terms
- Long-term implications to reputation, goodwill
- Industry, environment, ecosystem, society
________________________________________________________

CoSR: Governance
Internal steps taken by the organization to
manage its additional SR obligations and
commitments
Address SR Principles of Accountability,
Traceability, and Stakeholder measures
Safeguard from liability or risk
Accountability is drawn
- upward to the senior levels of the
organization,
- down across all functional areas and
departments
________________________________________________________

CoSR: Oversight
Refers to the external regulatory and
compliance groups needed to monitor
and provide independent oversight.
This addresses the Rule of Law, Ethical
Behavior, and International Norms.
Can include direct supervision or
inspection of the affected organization.
Scope may also expand to broad and
far-reaching domains that may be
affected by the product or service.
________________________________________________________

CoSR: Mitigation and Contingencies
Once risks are identified, there are
potential issues which may occur.
Mitigations anticipate and reduce
the impact of known risks
Contingency plans provide for an
alternative course of action with
redundancy or duplication.
Objective is to minimize damage
and disruption from the identified
risks.
________________________________________________________

CoSR: Treatment, Recovery, and Remediation
If any damaging or unfortunate effect has
occurred, there will be a need to:
- Treat the direct and immediate damage or
pollution
- Recover and restore the affected
company, stakeholders, or entities to a
recuperative state
- Correct any long-term or irreversible
effects identified or potentially estimated
Need to identify and act urgently to address
all Social Responsibility Principles,
particularly Accountability and Transparency
Sustained, long-term damage is more difficult
to correct and overcome, and more costly.
________________________________________________________

CoSR: Advocacy
This incorporates any training,
awareness lobbying, and general
promotion of proper conduct.
The Human Rights principle is
addressed.
This relates more to “soft-benefits”
which may not be immediately or
directly traceable.
Education and reinforcement is
necessary to avoid occurrence or
repetition of Socially Irresponsible
maladies and catastrophes.
________________________________________________________

CoSR: Adoption
SR principles and practices must be
deployed throughout the functional
areas of organizations and their
– vendors,
– partners,
– stakeholders.
Investment in this category is
intended to offset the need for other
potential SR costs.
Without the context of the other SR
Cost Categories, this is dismissed as
Overhead.
________________________________________________________

CoSR Case Studies: Big Auto
Examples of SR issues in Big
Auto include:
- Chevrolet Corvair released
with safety problems
- Ford Pinto released with
known rear-end impact safety
flaw
- Hyundai and Kia violated the
Clean Air Act
- Volkswagen used “defeat
devices” to pass emissions
tests
CoSR Category Cost Examples
Extended Monitoring
and Reporting
Testing and approvals
Governance Mgmt. and quality layers within
the organization
Oversight New departments for
transportation, public safety,
licensing, permits
Mitigation and
Contingencies
Redundant designs for worst-
case accidents and collisions
Treatment, Recovery,
and Remediation
After-market resources.
Corrections. Post-recall
restorations
Advocacy Safety, design controls,
emissions
Adoption Redefinition of product life,
liability, expected outcomes
________________________________________________________

Summary of costs incurred:
- Ford Pinto safety not fixed at $5-
8/vehicle, led to $ millions of losses.
- Kia and Hyundai agreed to pay a $100
million civil penalty for Clean Air Act
- Estimated VW losses will exceed $18
billion, EPA fines affecting 482,000
vehicles with faulty emissions outcomes
- Court ordered buyback of certain Diesel
automobile years and models
- Imprisonment for VW US Regulatory Director
- Additional costs of safety and regulatory
compliance create public sector growth
________________________________________________________

Future Considerations:
- Toyota Commitment to concept of
Social Innovation
- Volvo commitment to the accident-free
automobile
- Development and proliferation of self-
driving cars using new technologies
________________________________________________________

CoSR Case Studies: Oil, Mineral Spills
Examples of SR issues related to
oil and mineral spills include:
- Transportation accidents (i.e.
Exxon Valdez) resulting in
spillage
- Overflow of Mount Polley
Tailings Dam into water supply
- 3.3 million litres oil spillage
from a pipeline into the
Kalamazoo River in Michigan
Extended Monitoring
and Reporting
Early warning systems and
redundancies
Governance Extended management
systems for design,
prevention, and maintenance
Oversight Combined government efforts
across multiple departments
Mitigation and
Contingencies
High risk areas require
safeguards and contingencies
and Remediation
Communities and ecosystems
under repair
Advocacy Safety, environmental activism
Adoption Infrastructure, management
systems, and operating
conditions
________________________________________________________

- Exxon Valdez spill resulted in long-term 25+
year damage to 19 of 32 monitored wildlife
populations
- Mount Polley had 10 million cubic meters of
contaminated water spill into the water system
- Enbridge spilled 3.3 million litres of oil into 56
km stretch of Kalamazoo river, with onland
spillage recovery costs exceeding $1 billion
________________________________________________________

- Keystone Pipeline was approved, and
will travel across agricultural lands and
water tables
- Dakota Access Pipelines will be
constructed near land that is
considered to be the historical property
of aboriginal natives
- Low cost of petroleum places cost
pressure on safety and preventive
maintenance as discretionary items,
creating additional risks
________________________________________________________

CoSR Case Studies: SmartPhones
Examples of SR issues related to
smartphones include:
- Labor problems of inhumane
working conditions at overseas
contractors and manufacturers
- Product safety problems
related to flammability
- Malicious misuse and abuse of
smartphones for privacy
invasion, harassment, and
identity theft
Extended Monitoring
and Reporting
Alarm systems capture and
protect from product hazards.
Governance Management systems for
design, monitoring, and
replacement or modifications
Oversight Oversight of labor, technology,
commerce, and product safety.
Mitigation and
Contingencies
Supply chain monitoring,
product liability, malicious use
and abuse of technology.
and Remediation
Long-term implications to
society. Infinite costs of
personal harm and damages.
Advocacy Safe adoption of technology .
Adoption Responsible care and use to
promote safety and security.
________________________________________________________

- Foxconn wage and overtime violations
required repayment and legal scrutiny
- Samsung Galaxy Note 7 Recall of 2.6
million phones to cost $5.3 billion, and is
still restricted from airlines and public
places
- Identity theft and harassment: Synthetic
Identity Fraud costs $1 billion/year in
Canada alone
________________________________________________________

- Smartphone technology
and innovation may either
overthrow tyrannies
and/or sustain criminal
empires
- Frequent usage and
addiction requiring
intervention
- Human communication
and contact diminished by
texting
________________________________________________________

CoSR Case Studies: Legal Marijuana
Examples of SR issues in Legal
Marijuana include:
- Multiple applications
- Food additive
- Medicinal supplement
- Recreational indulgence
- Unanticipated hidden costs to
“grass-roots” business
opportunity
- Regulatory (International,
Federal, State/Prov. Municipal)
- Agriculture,
- Food and Drug
- Healthcare,
- Justice
- Import/Export, Econ. Dev.
Extended Monitoring
and Reporting
Similar to food, drug, medical.
Grading, traceability, dosage
Governance Consistency of product for use
and circulation
Oversight Monitoring, Good X Practices,
Access and distribution
Mitigation and
Contingencies
Antidote, interactions, Society
overindulgence
and Remediation
Toxic use and interactions
Control within neighborhoods,
treatment programs
Advocacy Productive dialogue, pragmatic
positions, research
Adoption Gradual introduction,
Responsible use, Supervision
________________________________________________________

Health Canada factors for legalization:
- Canadian usage rates (15-25%)
- Health benefits and risks
- International global legal framework
- 1961 Single Convention on Narcotic Drugs
- Medical Marijuana
- 2013 Marijuana for Medical Purposes
- Domestic Legal context
- Rights to grow for own use
- Other governments and jurisdictions
- Law enforcement
- Police agencies, Youth justice
________________________________________________________

USA factors for legalization:
- Variations between states of
legalization, medical use,
decriminalization, and full
prohibition
- Health benefits and risks to
individuals and families
- Legalization or
decriminalization may be
perceived as implicit approval
by government
- Economic boost project to $20-
35 billion to offset $20 trillion
national debt
________________________________________________________

Summary of costs projected:
- Potential industry of $36 billion
- Anticipate and prevent the equivalent of
the “Ford Pinto” or “Exxon Valdez”
- Increased costs of government
departments to ensure compliance and
monitoring:
- Controlled product provision will require
regulations across multiple levels and
layers of governments and departments
- Law Enforcement, Agriculture, Food and
Drug, Healthcare, Economic
Development, Transportation.
- Misuse or abuse of marijuana beyond
intended use creates additional crime and
social maladies for response and control.
________________________________________________________

- HACCP: Smoking, vaping, oils, edibles, etc.
are not consistent nor free from toxic
contaminants like pesticides, bacteria, or
chemicals
- Undetermined loss of function at different
levels of intoxication (what is equivalent to
0.08 blood alcohol level?)
- Definition of grades and units of measure for
quantity, potency, concentration, other
attributes
- Wine: German, Riesling, 13% Alcohol, Chilled
- Steak: Angus, AAA, Ribeye, Medium-rare, 1000 cal.
- Potatoes: Russet, wedged, parboiled & roasted
- Coffee: Columbian, Medium Roast, French Pressed
- Marijuana: ???
“(Facial Expression)
is not a unit of measurement”
________________________________________________________

Cost of Social Responsibility Conclusion
CoSR model: SR as Strategic Differentiator
The driver of the CoSR Cost Model is based on the
Strategy and Society article by Porter and Kramer.
Cited Whole Foods Market, Toyota, and Volvo
“CSR can be much more than a cost, a constraint, or
a charitable deed—it can be a potent source of
innovation and competitive advantage.”
Track SR costs by the CoSR Cost for:
- Adherence to SR Principles
- Strategic Planning, Governance
- Competitive Advantages
________________________________________________________

Questions / Comments
Daniel Zrymiak
ASQ Fellow
dzss@shaw.ca;
daniel.zrymiak@accenture.com
Surrey, B.C., Canada
________________________________________________________

Attend WCQI 2017 for Innovative Quality presentations

Recommended

Recommended

More Related Content

Similar to Attend WCQI 2017 for Innovative Quality presentations

Similar to Attend WCQI 2017 for Innovative Quality presentations (20)

More from Daniel Zrymiak, ASQ Fellow, CSQE, PMP, PSM

More from Daniel Zrymiak, ASQ Fellow, CSQE, PMP, PSM (17)

Recently uploaded

Recently uploaded (15)

Attend WCQI 2017 for Innovative Quality presentations