Chapter 4 Flashcards
What is CSR?
Corporate Social Responsibility
-Where companies integrate social and environmental concerns in their business operations and stakeholder interactions, voluntarily
-Continuous commitment by businesses to behave ethically and contribute to economic development
—- while improving the quality of life of the workforce and society at large
What concerns does CSR incorporate?
Sustainability
ethical corporate behaviour
environmental protection
support for human rights
fair working practices
supply chain management
equality and diversity
community involvement
What examples are there of sustainability reporting?
Sustainability reporting examples:
Economic: Performance, Market presence, Economic Impact, Procurement
Environmental: Materials, energy, transport, emissions, compliance
What does improving CSR do? (self interested)
- More, and loyal, customers,
- Better, and more committed, employees,
- Less intervention from government or regulators
- A better environment for all
What are the three types of stakeholder?
Internal, Connected, External
Define stakeholder
individual/group which AFFECTS or can be AFFECTED by the company’s ACTIONS
What is an internal stakeholder?
Internal: direct relationship, such as employment, ownership, or investment. An individual or group within the organisation which affects or can be affected by, the company’s actions.
E.g. Management, Employees, Executive directors
WITHIN
What is a connected stakeholder?
Connected: Not internal, but have dealings with the company. Indirect involvement
E.g. Customers, shareholders, lenders, suppliers, financiers, NEDs
What is an external stakeholder?
External: do not directly work with a company but are affected somehow by the actions and outcomes of the business.
E.g. Government, Community, Press/Media, Public Authorities, Interest Groups, Trade unions, pressure groups
What are the other categorisations of stakeholder?
Financial stakeholders and interest stakeholders
Financial: have some form of financial share or stake in a company
e.g. Employees, suppliers, customers, lenders, shareholders, government
Interest: have an interest in how the company performs
Competitors, media, pressure groups, local community.
Communication with stakeholders maybe direct – shareholders at AGM or indirect – Newspapers.
What are the 4 ethical stances that a company can take towards CSR
Short-term shareholder interests
Long-term shareholder interests
Multiple Stakeholder obligations
Shaper of Society
Johnson and Scholes
Ethical stance: Short-term shareholder interests
- Concentrate on shareholder wealth and pay tax on profits
- Go no further than law requires
Ethical stance: Long-term shareholder interests
- Consider deeper ethical responsibilities to enhance company’s image
- Reputational benefits of being ethical out-weigh the costs
Ethical stance: Multiple Stakeholder obligations
- Respect expectation of stakeholders other than the shareholders and make this company’s objective
Ethical stance: Shaper of Society
- High moral stance to every stakeholder
- Typically public/NGO
What is Carrols CSR model?
4 part pyramid ‘PELE’ E at bottom, and builds up
* Philanthropic Be a good corporate citizen
* Ethical : Behave ethically
* Legal: Obey the law
* Economic: be profitable
What are the four strategis of adopting PELE in relation to CSR
Proactive, Reactive, Defence, Accomodate
- Proactive – company fully prepared to take full responsibility for actions
o e.g. fault discovered, product recalled even if fault yet to cause problems - Reactive – company takes responsibility once an external entity prompts
o E.g. fault is discovered, not recalled until public or gov find out - Defence – company minimises or attempts to avoid additional obligations arising from a problem
o e.g. if fault discovered after purchase, product can’t be returned - Accommodation – company responds differently each time by taking account of stakeholders view
CSR and Brand management
A company’s CSR policy has a significant effect on the value of its corporate brand
To provide a source of real competitive advantage any CSR initiatives need to be aligned with overall corporate strategy
Define Globalisation
the increasing integration of internationally dispersed economic activity
Define Supply Chain
: the organisations that
participate in the flow of products, services, finances and information
from a source to a customer.
CSR and the supply chain
The key role of the supply chain in CSR is driven by increased globalisation.
As supply chains get globalised, it is increasingly difficult and important to ensure CSR
What must the purchasing organisation do to have a fair and positive impact on it’s supply chain
It must ensure complience with
-(inter)national laws/agreements/codes
Supply chain audits give assurance that business practices in supply chains are in line with the stated CST intentions of the company and the standards to which it subscribes
What principles to reduce environmental impact in supply chains?
The European Commissions Integrated Product Policy (IPP) outlines a strategy for policy makers to help reduce the environmental impact caused by products throughout their lifecycle
What are the 5 key principles of EC’s IPP
- Life cycle thinking:
- Work with the market
- Stakeholder involvement:
- Continuous improvement:
- Policy Instruments:
Luck WOuld May SI CI PI
EC IPP: Life Cycle Thinking
- Life cycle thinking: encourage reduction of a product’s environmental impact throughout its life cycle, without shifting the environmental burden from one part of the life cycle to another
EC IPP: Work with the market
- Work with the market: establish incentives for sustainable behaviour, rewarding companies that are innovative, forward-thinking and committed
EC IPP: Stakeholder involvement
- Stakeholder involvement: encourage all stakeholders to act across their sphere of influence to support the purchase, use and proper disposal of more environmentally aware prodcuts
EC IPP: Continuous Improvement
- Continuous improvement: in identifying and changing how a product impacts the environment across its life cycle
EC IPP: Policy Instruments
- Policy Instruments: the IPP started with voluntary standards but mandatory ones are possible
Strategic CSR
A strategic approach to CSR means allocating appropriate available resources to socially responsible objectives in order to boost competitive advantage. A strategic approach should als ensure that CSR is not overlooked
OECD general policies on CSR
-OECD publishes guidelines for multinational enterprises. The guide contains 15 general policies on CSR. These are non-binding principles.
What are the UN Global Compact principles
The UN GC is a UN body which supports comapnies to do business in line with the UN GC 10 principles
4 categories
Human rights
labour
Environment
anti-corruption
UN GC Principles: Human rights
1) Should support and respect the protection of internationally proclaimed human rights, and
2) Make sure they are not complicit in human rights abuses
UN GC Principles: Labour
3) Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining
4) The elimination of all forms of forced and compulsory labour
5) The effective abolition of child labour, and
6) The elimination of discrimination in respect of employment and occupation
UN GC Principles: Environment
7) Businesses should support a precautionary approach to environmental challenges z
8) Undertake initiatives to promote greater environmental responsibility, and
9) Encourage the development and diffusion of environmentally friendly technologies
UN GC Principles: Anti-corruption
10) Businesses should work against corruption in all its forms, including extortion and bribery
3 Arguments against CSR
- Higher company profits mean more tax revenue to the government
- Shareholders can donate to charity out of dividends
- A company manager’s durt is to maximise shareholder wealth within the law, all other activities are theft
What is the GRI
Global reporting initiative
-Independant organisation that focuses on sustainability issues
Companies use environmental reporting to account for environmental and social impacts
where companies report on the
Direct impacts - within the company - easier to establish and report
Indirect impacts - (forward and backward supply chains - harder to establish and report
GRI: Reporting principles
- Balance
- Comparability
- Accuracy
- Timeliness
- Clarity
- Verifiability
- Completeness
- Sustainability Context
ABCCC STV
A method for companies to report on CSR:
Triple bottom line: for companies to report on a triple bottom line, covering the following.
* Profit (economic)
* Planet (environmental)
* People (social)
Triple Bottom Line reporting: Economic
-How a company impacts on the economic conditions of its shareholders and on the economic systems it operates
-may also include its policies regarding local and global economies and disclose targets and its strategy gor meeting those targets
Triple Bottom Line report: Environment
-How a company impacts the physical environment
-Disclosures likely include policies on waste, emissions and pollution
Triple Bottom Line report: Social
-The impact the company has on the social systems in which it operates
-Focus is on human rights and labour practices
Why report on ESG?
1) Accountability and transparency
2) Business Case
Why report on E and S topics? Accountability and Transparency
-a- increase transparency, reducing the agency problem
-allows company to respond to stakeholder concerns/ an accident
Why report on E and S topics? business cases
-Reputational risk
——-could threaten company’s survival
-Encourages internal efficiency of operations.
-Disclosures can contain environmental risks which can be significant, if a company better understand the source of these risks and how they can best be managed/mitigated
Stakeholder objectives and conflict
Primary objective of a company is typically maximisation of shareholder wealth
-However max of shareholder wealth can result in negative impacts - causing conflict (minimising wages and supplier prices) - exploiting natural evironment and not giving back
-results in strikes, poor relationships with suppliers, mistrust with customers
Considering CSR ensures that the needs of other stakeholders are taken into account
New GRI: What standards have GRI produced?
3 types of standards to help organisations report transparently about sustainability
1) universal standards (any company
2) sector standards (for sector specific standards)
3) topic standards (for material topics)
New GRI: What are the three Universal standards
GRI 1,2 and 3
1 Requirements and principles for using the GRI standards
2 Disclosures about the reporting organisation
3 Disclosures and guidance about the organisations material topics
New GRI: What is the reporting process?
1) Understand system and standards
2) Apply reporting principles throughout process
3) Identify and assess impacts and determine material topics
4) report relevant disclosures (using three standards)
New GRI: reporting process
- Understand organisations context
- Identify actual and potential impacts
- Assess the significance of the impacts
- Prioritise the most significant impacts
