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Business & Corporate Social Responsibility

CSR is an increasingly important topic for business students. This revision presentation explains the basic theory behind CSR and outlines the main arguments for and against implementing CSR. Various case studies are also provided together with links to further research.

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Business & Corporate Social Responsibility

  1. 1. Corporate SocialResponsibility
  2. 2. What isCSR?
  3. 3. A possible problem for studentsThere is no single accepted definition of CSR, whichcause confusion about what constitutes a CSR activity
  4. 4. The EU definition! “a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis”Source: European Commission (2010) – Corporate Social Responsibility
  5. 5. CSR is called different things… Corporate Sustainable Citizenship Business Corporate SocialResponsibility Responsibility CorporateSustainability
  6. 6. The basic questions atthe heart of CSR are as old as business itself
  7. 7. WhatWhat is contributionbusiness should it make for? to society? 1 2
  8. 8. CSR is based on the concept of interdependence Society needs Business needs Business Society Employment & Create demand wages Investment & Public assets & innovation infrastructure Profits and taxes Legal protection Interdependence of Business & Society
  9. 9. Society’s needs are huge Better Nutritio n Financia Better l Health Protect Security Environ- Help the ment Protect Consumer Ageing sA threat or an opportunity for business?
  10. 10. The new role for CSR?In today’s world where businesshas become global butgovernments have remained local,companies have to bear the socialresponsibility for their actions.
  11. 11. The debate on social responsibility• Not all business organisations behave in a socially responsible manner• Some argue that it is not the job of businesses to be concerned about social issues and problems• Two schools of thought: – Free market view: the job of business is to create wealth for shareholders – Corporate social responsibility view: business should be concerned with social issues
  12. 12. Contractual StakeholdersEmployees Suppliers Customers Have a legal relationship with a business
  13. 13. The corporate responsibility view• Businesses do not have an unquestioned right to operate in society• Those managing business should recognise that they depend on society• Business relies on inputs from society and on socially created institutions• There is a social contract between business and society involving mutual obligations that society and business recognise that they have to each other
  14. 14. Arguments for CSR• It is the ethical thing to do• It improves a business’ image and reputation• It is necessary in order to avoid excessive regulation• Socially responsible actions can be profitable• An improved social environment will be beneficial to a business• It will be attractive to some investors• It can increase employee motivation• It helps to corrects the social problems caused by business
  15. 15. How firms can bring a focus to CSRSource: McKinsey2010
  16. 16. Social responsibility to consumers• Value for money • Product testing• Product quality and safety • Responsible selling and• Fair and honest promotion advertising • Fair handling of• After sales service complaints• Country/place or origin • Labour rights in the• Local sourcing supply chain • Availability of information• Sustainable products to make informed decisions
  17. 17. CSR in the workplace - issues• Fair treatment at work• Workforce diversity and equal opportunities• Right to be kept informed• Health and safety• Work life balance / flexible working• Opportunities for participation in decision-making• Training in new skills• Provision of social facilities• Job design and satisfaction• Working conditions• Attitude to disadvantaged groups
  18. 18. CSR in the community - issues• Minimising noise and other pollution• Consultation about major change• Sourcing from local suppliers• Protecting local employment• Labour rights in the supply chain• Product health and safety• Diversity in the workplace
  19. 19. CSR & the environment - issues• Effects of pollution, noise, waste disposal, congestion• Waste management• Chemical use• Avoiding excessive packaging• Use of energy• Water consumption• Biodiversity• Carbon emissions
  20. 20. Why do firms engage in CSR now?• Altruism – being a good citizen• Window-dressing to appease stakeholders• Contracting benefits – e.g. helps recruit, motivate and retain employees• Customer-related motivation: attract customers; brand positioning• Reduction in production costs (packaging, energy usage)• Risk management – address potential legal or regulatory action• Improve access to capital – ethical investment funds
  21. 21. The TheoryThe Case Against CSR
  22. 22. ShareholderValue Theory
  23. 23. “Thebusiness ofbusiness…is business”MiltonFriedman
  24. 24. “…the only oneresponsibility of businesstowards the society is themaximisation of profitsto the shareholders,within the legalframework and theethical custom of thecountry”
  25. 25. “Even in these uncertain Jack Welch Former Chairman times, every company & CEO GE should practice goodcorporate citizenship. Butthey also need to face thereality that you first have to make money before you can give it away.” away
  26. 26. The case against CSR• The only social responsibility of business is to create shareholder wealth• The efficient use of resources will be reduced if businesses are restricted in how they act• Businesses cannot decide what is in society’s interest• Extra costs will be incurred which must be passed on to consumers• CSR stifles innovation
  27. 27. Some results of this approach?• Growing global competition on price• Short-term performance pressures from shareholders• Constant restructuring & downsizing• Relocation to low-cost regions• Commoditisation
  28. 28. The TheoryThe Case for CSR
  29. 29. Corporate social responsibility means…• Conducting business in an ethical way and in the interests of the wider community• Responding positively to emerging societal priorities and expectations• A willingness to act ahead of regulatory confrontation• Balancing shareholder interests against the interests of the wider community• Being a good citizen in the community
  30. 30. Is CSR the same as business ethics?• Clearly an overlap• Both concern values ,objectives and decisions based on something other than the pursuit of profit• Socially responsible firms must act ethically• The difference: – Ethics concern actions which can be assessed as right or wrong by reference to moral principles – CSR is about the organisation’s obligations to all stakeholders – and not just shareholders
  31. 31. Ethical Stance of a Business The extent to which a business will exceed its minimum obligations tostakeholders and society at large
  32. 32. CSR has changed in the last 10 years 2000 2012… CSR was a CSR is an moral issue Strategic / profit “We want to do the issue right thing; we want to “Ignoring CSR potentially invest in the damages shareholders. community” Embracing it creates value”
  33. 33. What Society Expects What SocietyRequires
  34. 34. “CSR” has been around for a long time
  35. 35. The original aims of CSRMake employees healthier & more productive…
  36. 36. …andphilanthropy
  37. 37. Why was 1982 so important forCSR in the UK? Lead to the formation of Business in the Community
  38. 38. What happened in 1995?
  39. 39. CSR influenced by the rise of activist NGOs
  40. 40. Source: Kotler & Lee, 2005
  41. 41. Cause PromotionSource: Kotler & Lee, 2005
  42. 42. Source: Kotler & Lee, 2005
  43. 43. Socially responsible business practicesSource: Kotler & Lee, 2005
  44. 44. Prof Michael PorterCSR turns into CSV Creating Shared Value
  45. 45. Creating Shared Value (CSV)Companies can create economic value (profit) by creating societal value Advanced Developing Economies Economies
  46. 46. Porter on CSR “The capitalist system is under siege. In recent years business 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, leading to a diminished trust in business”Source: Creating Shared Value; Porter & Kramer, HBR, 2010
  47. 47. Creating Shared Value (CSV) Advanced EconomiesDemand for products & services that meet societal needs is rapidly growingHealthier fast Fair Energy food trade efficient
  48. 48. Creating Shared Value (CSV) Developing Economies 5 billion people living on less than $2 per day
  49. 49. How CSV Differs from CSRSource: The Big Idea: Creating Shared Value, Porter & Kramer,Harvard Business Review, 2010
  50. 50. CSR in Business Strategy
  51. 51. CSR into strategy? What percentage of Global CEOs are planning to change strategies in the next three years because they expect stakeholders to factor companies’ environmental and corporate responsibility practices into purchasing decisions.Source: PwC’s Annual Global CEO Survey 2011
  52. 52. CSR into strategySource: PwC’s Annual Global CEO Survey 2011
  53. 53. But CSR is often peripheral to a firm’s corporate objectives One problem is that firms manage their CSR functions too narrowly, often within the marketing or investor relations department. CSR is therefore managed tactically and tends to operate at a distance from strategic decision-makingSource: McKinsey Quarterly 2010
  54. 54. Sources of CSR Case Studies
  55. 55. CSR in action - BITC
  56. 56. Case studies in CSR excellence
  57. 57. More CSR Examples
  58. 58. Quotes on CSR (1) Niall Fitzgerald "Corporate social Former CEO, responsibility is a hard- Unilever edged business decision. Not because it is a nice thing to do or becausepeople are forcing us to do it... because it is good for our business"
  59. 59. Quotes on CSR (2) Dame Anita“The business of business Roddick Body Shop should not be about money, it should be about responsibility. It should be about publicgood, not private greed”
  60. 60. Quotes on CSR (3) Warren Buffett“It takes 20 years Berkshire Hathaway to build a reputation and five minutes to ruin it.”
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