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Unit 2. CSR and Triple bottom line.ppt
- 1. Unit II: CSR &Triple bottom line
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- 3. 3 Global Executives OnRole Of Business 84% 16% Which of the following statements best describes the role that large corporations should play in society Generate high returns to investors but balance with contributing to the broader public good Focus solely on providing highest possible returns to investors while obeying all laws & regulations Source Dec 2005 McKinsey Quarterly survey of 4,238 global business executives
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- 5. 5 What is themeaning of CSR? Source: Fleishman Hillard/National Consumers League study, “Rethinking Corporate Social Responsibility”
- 6. 6 Societal Views ofLarge Corporations Around the world... 10-20% 60-70% Sources: GlobeScan, Wirthlin, Edelman
- 7. 7 Expectations are highfor Business Companies “Held Completely Responsible for,” Average of 25 Countries
- 8. 2t. I amgoing to read a list of things some people say should be part of the responsibilities of large companies. For each one, please tell me to what extent you think companies should be held responsible. In answering, please use a scale of 1 to 5, where 1 is “Not held responsible,” 3 is “Held partially responsible,” and 5 is “Held completely responsible.” What about…?
- 9. •Defensive. When firstcriticized over some problem, companies take a defensive stance. They reject allegations of wrongdoing & refuse to take responsibility. •Compliant. During this stage, companies do only what they have to do to satisfy their critics, protect brands or reputations, & reduce the risk of litigation. •Managerial. When it’s clear that the problem won’t go away, companies take responsibility & look for long-term solutions. •Strategic. At this point, they may start to reap the benefits of acting responsibly. Responding to public needs gives them a competitive edge & enhances long-term success. •Civil. Ultimately, companies recognize the importance of getting other companies to follow their lead. They enlist the cooperation of other companies in supporting the issue of concern to the public. Stages Of Corporate Responsibility
- 10. 10 Stages Of CorporateResponsibility Stage 1: Compliant Stage 2: Engaged Stage 3: Innovative Stage 4: Integrated Stage 5: Transforming Citizenship Concept Jobs, Profits & Taxes Philanthropy, Environmental Protection Stakeholder Management Sustainability or Triple Bottom Line Change the Game: Business in Society Strategic Intent Legal Compliance Reputation Business case Value Proposition Market Creation or Social Change Leadership Lip Service, Out of Touch Supporter, In the Loop Steward, On Top of It Champion, In Front of It Visionary, Ahead of the Pack Structure Marginal: Staff driven Functional Ownership Cross-Functional Coordination Organizational Alignment Mainstream: Business Driven Issues Management Defensive Reactive, Policies Responsive, Programs Pro-Active, Systems Defining Stakeholder Relationships Unilateral Interactive Mutual Influence Partnership Alliance Multi- Organizations Transparency Flank Protection Public Relations Public Reporting Assurance Full Exposure
- 11. Brands feel the impactas activists target customers Financial Times Brands feel the impact as activists target customers Financial Times CSR from OUTSIDE IN
- 12. To be moreresponsible….
- 13. Success in tomorrow’smarkets means working with stakeholders to understand, predict, & shape our future environment & ways of living. Tackling important problems together will require teamwork & respect.” Jeff Immelt Current CEO, General Electric
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- 16. Base of thePyramid, Micro-Finance, Eco-Effectiveness CSR Partnerships Cheap Labor/Sourcing, Obesity/Consumerism, Environmental Damage, Bribery Nationalization Access to Medicine Access to Credit Piracy Climate Change Digital Divide, Youth Unemployment, Corruption SOCIETY B U S I N E S S S Opportunity Risk Source: Beyond Good Company Risk Opportunity Business & Society: Risk & Opportunities
- 17. Revolutionary Renewal Strategic activitiescontribute both to repairing & also to building society & environment Sustainable Enterprise All functions & actions are sustainable in economic, social & environmental terms Social Responsibility Society & environmental initiatives are integral to strategy – “do good” Compliance & Disclosure “Do no harm” Act within legal & ethical codes of conduct Benefit to Business Benefit to Society
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- 20. Leadership development Adaptability Long-term strategicview License to operate Supply chain/security of supply Regulatory risk Reputational risk Workforce efficiency Operational efficiency Reputation/price premium New markets Reputation / differentiation Innovation New customers/ market share New products Management quality Risk management Return on capital Growth CSR creates financial value along 4 dimensions ▪ Novo Nordisk: Earned market leadership in China with market share above 70% ▪ Verizon: Increased sales by $6 million, with potential growth of a new market of over $600 million ▪ Dow: Invested $1 billion over 10 years to reduce its energy consumption & improve its efficiency & has saved $7 billion in last 5 years ▪ IBM: Improved global leadership skills, employee retention & commitment to IBM, new knowledge & skill contribution to IBM ▪ Nestlé: Earned $4.5 billion in 2007 through the sales of PPP (Popularly Positioned Products) Source: Mirvis/McKinsey Study
- 21. 21 Although many companiescreate value from ESG(Envi,Social,Gov), very few assess the financial value creation & even fewer communicate that to the markets Percent of companies interviewed = 100% -40% -5% -40% -10% ESG program Maximizing value from ESG Established metrics to monitor program Converting ESG metrics to financial value Communicate ESG value to CFOs, investors Creating value Assessing value Communicating value Source: BCCCC/McKinsey Study
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- 23. The Role ofCitizenship on Corporate Reputation 11 March 2008
- 24. 24 • Triple bottomline means expanding the traditional framework to take into account ecological & social performance in addition to financial performance. • In 1981 Freer Spreckley first articulated the term in a publication called 'Social Audit - A Management Tool for Co-operativeWorking'. • Sustainability, itself, was first defined by the Brundtland Commission of the United Nations in 1987. • The phrase was coined by John Elkington in his book ’Cannibals with Forks: the Triple Bottom Line of 21st Century Business’in the year 1998. • The concept of TBL demands that a company's responsibility lies with stakeholders rather than shareholders. • In this case, "stakeholders" refers to anyone who is influenced, either directly or indirectly, by the actions of the firm. The Concept
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- 26. 26 PEOPLE "People" (human capital)pertains to fair & beneficial business practices toward labour & the community & region in which a corporation conducts its business. A TBL company conceives a reciprocal social structure in which the well-being of corporate, labour & other stakeholder interests are interdependent.
- 27. 27 PLANET (natural capital) refersto sustainable environmental practices. A TBL company endeavors to benefit the natural order as much as possible or at the least do no harm & curtail environmental impact. A TBL endeavor reduces its ecological footprint by, among other things, carefully managing its consumption of energy & nonrenewable & reducing manufacturing waste as well as rendering waste less toxic before disposing of it in a safe & legal manner. TBL manufacturing businesses which typically conduct a life cycle assessment of products to determine what the true environmental cost is from the growth & harvesting of raw materials to manufacture to distribution to eventual disposal by the end user. A tbl co does not produce harmful or destructive products such as weapons, toxic chemicals or batteries containing dangerous heavy metals.
- 28. 28 PROFIT "Profit" is theeconomic value created by the organization after deducting the cost of all inputs, including the cost of the capital tied up. It therefore differs from traditional accounting definitions of profit. In the original concept, within a sustainability framework, the "profit" aspect needs to be seen as the real economic benefit enjoyed by the host society. It is the real economic impact the organization has on its economic environment. This is often confused to be limited to the internal profit made by a co or organization (which nevertheless remains an essential starting point for the computation). Therefore, an original TBL approach cannot be interpreted as simply traditional corporate accounting profit plus social & environmental impacts unless the "profits" of other entities are included as a social benefits.