10 - CSR and stakeholders Flashcards
Is there an agreed definition of CSR?
No - I will use World Business Council for Sustainable Development
World Business Council for Sustainable Development definition of CSR
The continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large
What is meant by corporate citizenship?
Balancing financial needs of shareholders with societal needs of the state
Companies should act in the same way as citizens of the countries in which they operate; meet legal ethical and economic responsibilities expected of its citizens
6 terms used to describe CSR
- Corporate citizenship
- Responsible business
- Sustainable responsible business
- Corporate social performance
- Corporate moral responsibility
- Corporate sustainability
2 ways in which sustainability (re. CSR) can be defined
- Long-term survival of the organisation, by balancing requirements without compromising needs of future
- Long-term survival of the planet - companies should develop strategy with considerations made not to have extremely negative effect on environment
What does ESG stand for?
Environmental
Social
Governance
4 different sources of CSR (or motivating for companies to follow/implement CSR)
- Organisations themselves
- Governments
- Bilateral organisations
- Demands of investors & customers
5 reasons why organisations would focus on CSR (advantages of CSR)
- To gain competitive advantage
- To reduce risk
- To attract financial and human capital
- For innovation
- For sustainability
How can CSR be used to reduce risk (reputational mainly)
If a company is not taking CSR issues into account, and adjusting their operations and strategy to cater to them, they could face adverse publicity, customer backlash and in turn financial loss
How can CSR be used to attract human capital
Easier to attract and retain talented employees, especially millennials. These employees will likely be motivated to perform better
How can CSR be used for innovation
New services are brought to people without access previously (eg. mobile banking)
How can CSR be used for sustainability (2)
Greater consideration of sourcing of resources and scarcity, and using these more efficiently and effectively
Link to reputational risk - reputational risk will damage the long term prospects of the company and by virtue its sustainability
How can CSR be used to obtain competitive advantage
By taking CSR issues seriously the company will become more attractive to customers in the industry, particularly the youth who take these issues seriously
Example of using CSR be used to obtain competitive advantage
Cadbury committing to having all chocolate certified by Fairtrade
Why would governments and bilateral orgs bring in laws and regulatory requirements re. CSR?
To protect the environment and improve the lives of its citizens
Why would investors consider CSR when investing?
- Recognise the impact a poor CSR record can have on reputation
- They may only invest in companies which they consider moral
Explain ‘greenwashing’ re. CSR
Sceptics claim most orgs only become involved in CSR for improper motives - ie. enhanced reputation - and therefore engage in CSR as a form of superficial window-dressing
Another improper purpose may be to disguise/distract from unethical/practices they are involved in
3 linked consequences of a company falling foul to greenwashing with CSR, or not fulfilling their promises
- Drop in trust/brand value
- Loss of sales
- Drop in the share price
Impact of millennials on CSR explained
As more millennials come into the work force, need for CSR as increasing, as millennials put more weight on need for CSR
4 categories of CSR
- Philanthropy
- Pet projects
- Partnerships
- Propaganda
Which category of CSR is of high benefit to society and high benefit to the organisation?
Partnerships
Which category of CSR is of high benefit to society but low benefit to the organisation?
Philanthropy
Which category of CSR is of low benefit to society but high benefit to the organisation?
Propaganda
Which category of CSR is of low benefit to society and low benefit to the organisation?
Pet projects
Examples of a ‘pet project’?
Sponsoring art exhibition, local sports club
Why is philanthropy often not of much benefit to the organisation?
There is often little noise and fanfare
Examples of propaganda in CSR
Sponsoring large sporting events, covering properties in advertising
7 principles which a win-win CSR partnership should aim to follow
- Identifying clear reasons to collaborate
- Finding people totally committed to partnership
- Set simple, credible goals
- Get professional help (to assimilate partners)
- Dedicate good people to the cause
- Be flexible in defining success
- Prepare to let go
How is CSR linked to exec remuneration?
Some orgs are starting to include achieving certain status on CSR index as part of performance criteria in bonus and incentive schemes
2 examples of CSR benchmarking incentives
- FTSE4Good Indexes
- Business in the Community (BITC) Responsible Business Tracker
Define integrated thinking
The process of taking into consideration in a balanced way the effective and efficient utilisation of various capital resources when develop strategy or decision-making
6 capitals that companies need to manage effectively and in an integrated way
- Financial capital
- Human capital
- Manufactured capital
- Intellectual capital
- Natural capital
- Social capital
How is the silo effect related to integrated thinking?
CoSec should be watching out for different types of capital being managed separately
Hoe can silo effect in integrated thinking be countered? (2)
- CEO having regular senior management meetings
- CoSec reading various proposals to obtain holistic view across all capitals are taken within proposals
3 types of engagement with stakeholders
Reactively
Proactively
Interactively
Explain reactive engagement with stakeholders
Engaging defensively in response to a crisis to rebuild its reputation
Explain proactive engagement with stakeholders
Efforts by organisation to understand stakeholders concerns and issues - surveys/focus groups, running proposals by shareholders, involving stakeholders in decision-making
Explain interactive engagement with stakeholders
Ensuring ongoing relationships of mutual respect, openness, and trust with stakeholders, through utilisation of ‘proactive’ channels
One or a combination of which 3 methods should be used for engagement with the workforce
- Director appointed to board from workforce
- Formal workforce advisory panel
- Designated NED
5 elements of role of CoSec in stakeholder engagement
- Explaining to the board the business case for stakeholder engagement
- Assisting the board with stakeholder engagement
- Advising board on reporting on stakeholder engagement
- Advising board and/or management to opportunities and risks associated with stakeholder engagements
- Advising board on setting up committee responsible for stakeholder issues
5 ways that CoSec may assist board with stakeholder engagement
- Identifying which shareholders have legitimate expectations and interests
- Documenting concerns and issues of stakeholders
- Convening shareholder forums
- Inviting key stakeholder reps to address board meetings
- Discussing and approving KPIs
5 types of CSR issues and activities
- Environmental
- Community
- Employees
- Ethics
- Suppliers
Explain environmental - CSR issue/activity
Impact of business on environment, including carbon footprint, energy efficiency, approach to plastic and approach to waste
Explain community - CSR issue/activity
Developing relationships with, and supporting the local community
Explain employees - CSR issue/activity
Considering its approach to employee well-being and employee protecting, and approach to diversity and inclusivity
Explain ethics - CSR issue/activity
Considering whether it should adopt a code of ethics, and whether it has the right ethical approach to business practices
Explain suppliers - CSR issue/activity
The checks a company imposes on its suppliers, to ensure they are aligned with the company’s own ethics and do not engage in bad practices
Most important CSR initiative that could be referenced in exam
17 goals to transform our world - UN sustainable development
2 of the 17 goals to transform our world - UN sustainable development that could be referenced in exam
Gender equality
Climate action
How might a company proactively and interactively engage with customers?
- Meet regularly with representatives of disgruntled customers
- Ask customers to complete surveys
- Setting up customer focus groups
How might a company proactively and interactively engage with suppliers?
Meet regularly with key suppliers
3 elements of role of CoSec in engagement with shareholders
- Assisting board with shareholder engagement
- Advising board on reporting on shareholder engagement
- Advising board on setting up a committee responsible for stakeholder issues
How would cosec assist board with stakeholder engagement (2)
Support board by producing analysis identifying stakeholders with legitimate expectations and interests in XYZ
Convene stakeholder forums or arrange for key stakeholders to speak directly to the board
How would CoSec advise board on reporting on stakeholder engagement?
CoSec is a key advisor to the board on reporting to specific stakeholder groups, such as through the annual report.
How would advise board on setting up committee responsible for stakeholder issues? (3)
CoSec should advise board on whether a specific committee should be established to deal with stakeholder issues.
Should consist of a majority of board members but also management.
Should function similarly to other board committees
Look at Code - what are the relevant principles / provisions in relation to stakeholder engagement?
Principle D
Provision 5
Look at Code - what are the 3 primary methods of engagement with the workforce?
- a director appointed from the workforce;
- a formal workforce advisory panel;
- a designated non-executive director.
Look at Wates Principles - what is the key principle in relation to stakeholder engagement
Principle 6
How will dialogue with shareholders benefit large private companies?
Boards will understand the effects of company policy and practices, and can predict future developments and trends and re-align strategy accordingly.
Boards can prioritise certain stakeholder relationships which are particularly relevant to the future success of the company
What is the most significant legislation within CA2006 relating to stakeholder engagement? and why? (2)
S.172.
It states that directors must take into account a company’s key stakeholders in order to perform their duty to promote the success of the company.
Large Private companies must report on how regard was had to matters set out in S.172 under Companies (Miscellaneous Reporting) Regulations 2018.
What is S.172 of CA2006
Directors have a duty to promote the success of the company, having regard to:
(a) the likely consequences of any decision in the long term,
(b) the interests of the company’s employees,
(c) the need to foster the company’s business relationships with suppliers, customers and others,
(d) the impact of the company’s operations on the community and the environment,
(e) the desirability of the company maintaining a reputation for high standards of business conduct, and
(f) the need to act fairly as between members of the company.
2 annual report disclosure requirements re. stakeholder engagement
- Strategic report - purpose being to help members assess how directors have performed S172 duty (with regard to S172(1) factors
- Directors’ report - explain how board has engaged with shareholders, how directors have had regard to employees’ interests, and the effect of that regard
Why would a company voluntarily include information on CSR matters in reporting
- To further enhance the benefits of engaging in the CSR activities in the first place - greater exposure of CSR activities means more publicity and awareness of it
- So that it is better placed to meet requirements for mandatory reporting which one would expect to be brought in at some stage
- In order to ‘greenwash’ (consider this is something to avoid when reporting as allegations can be very damaging - reporting cannot be inaccurate or over promising)
