Chapter 4 Corporate Social Responsibility

Question 1

What is corporate social responsibility?

Answer 1

• Concept where companies integrate social and environmental concerns in business operations
• It’s the continuous commitment by business to behave ethically and contribute to economic development while improving quality of life

Question 2

What is the meaning of CSR?

Answer 2

Companies should not operate in isolation without consideration of its environment

Question 3

What concerns does CSR incorporate?

Answer 3

> Sustainability 
> Ethical Corporate Behaviour
> Environmental Protection
> Support for Human Rights 
> Fair Working Practices
> Supply Chain Management
> Equality & Diversity
> Community Involvement

Question 4

What are the economic examples of sustainable reporting?

Answer 4

1. Performance
2. Market Presence
3. Economic Impact
4. Procurement

Question 5

What are the environmental examples of sustainable reporting?

Answer 5

> Materials
> Energy
> Transport
> Emission
> Compliance

Question 6

What is enlighted self interest?

Answer 6

Improving CSR will =>

a) More loyal customers
b) Better committed employees
c) Less intervention from govt or regulators
d) Better environment for all inc the company itself

Question 7

What are the different categories of stakeholders?

Answer 7

Internal - management, employees

External - Stakeholders, lenders, customers, suppliers

Connected - suppliers, customers, shareholders, banks providing finance, NEDs

Financial - employees, suppliers, customers, lenders, shareholders, govt

Interest - Competitors, media, pressure groups, local community

Question 8

What is the primary obejctive of a company?

Answer 8

To maximise shareholder wealth which is to maximise the present values of the company’s future cash flows

Question 9

What does maximising shareholder wealth mean?

Answer 9

1. Minimising the wages paid to employees and prices paid to suppliers
2. Getting as much out of customers for as little as possible in return
3. Exploiting the natural environment

Exploiting wealth only => open conflict with other stakeholders

Question 10

What are the four ethical stances towards CSR set out by Johnson & Scholes?

Answer 10

1. Short-term shareholder interests - concentrate on shareholder wealth and pay its tax on its profits
2. Long-term shareholder interests - considering deeper ethical responsibilities enhances company’s image. Reputational benefits of being ethical outweigh the costs.
3. Multiple stakeholder obligations - companies should respect the expectation of stakeholders other than the shareholders and make this the company’s objective.
4. Shaper of society - taking high moral stance to every stake holder (mainly public or not for profit organisations)

Question 11

What is the 4-part CSR ‘pyramid’?

Answer 11

Philanthropic responsibilities = good corporate citizen
Ethical responsibilities = behave ethically
Legal responsibilities = obey the law
Economic responsibilities = be profitable

Question 12

What are the four different strategies for CSR?

Answer 12

1. Proactive strategy: where company is prepared to take full responsibility for its actions
2. Reactive strategy: where the company only takes responsibility once an external entity prompts them to do so
3. Defence strategy: Where company minimises to avoid any additional obligations arising from a particular problem
4. Accommodation strategy: Where company responds differently each time by taking account of stakeholder’s views

Question 13

What is the definition of supply chain?

Answer 13

Organisations that participate in the flow of products, services, finances and information from a source to a customer. Organisations share linkages e.g. customer and supplier.
- Based on principle that the participants business success depends in part upon performance of supply chain.

Question 14

What is the definition of globalisation?

Answer 14

The increasing integration of internationally dispersed economic activity

Question 15

What should a purchasing organisation make sure it complies with as a minimum?

Answer 15

1. National laws and international agreements

2. Relevant international voluntary codes of practice and standards

Question 16

What is a supply chain audit?

Answer 16

Gives assurance that business practices in supply chains are in line with the stated CSR intentions of the company, and the standards to which it subscribes.

Question 17

What are the principles that reduce environmental impact in supply chains?

Answer 17

1. Life cycle thinking - encourage reduction of products environmental behaviour, rewarding companies that are innovative, forward-thinking
2. Work with the market - establish incentives for sustainable behaviour
3. Stakeholder involvement - encourage them to act across their sphere of influence to support environment
4. Continuous improvement - identifying and changing how a product impacts the environment across its life cycle
5. Policy Instruments - the IPP started with voluntary standards but mandatory ones are possible

Question 18

What is the strategic approach to CSR?

Answer 18

• Means allocating appropriate available resources to socially responsible objectives in order to boost competitive advantage.

Question 19

What is the OECD?

Answer 19

It publishes guidelines for multinational enterprises. Contain 15 general policies on CSR => non-binding principles, have the status of recommendations

Question 20

What are the 15 OECD general policies on CSR?

Answer 20

1. Contribute to economic, environmental and social progress
2. Respect internationally recognised human rights of those affected by their activities
3. Encourage local capacity building through close co-operation with the local community, including business interests, as well as developing the companies activities
4. Encourage human capital formation
5. Refrain from seeking or accepting exemptions not contemplated in the statutory or regulatory framework
6. Support and uphold a good corporate governance principles and practices
7. Develop and apply effective self-regulatory practices and management systems that foster a relationship of confidence and mutual trust
8. Promote awareness and compliance by workers employed
9. Refrain from discriminatory or disciplinary action
10. Carry out risk-based due diligence
11. Avoid causing or contributing to adverse impact where they have not contributed to that impact, when the impact is nevertheless directly linked to their operations, products or services
12. Seek to prevent or mitigate an adverse impact where they have not contributed to that impact but linked directly to their operations
13. Addressing adverse impacts in relation to matters covered by the guidelines encourage
14. Engage with relevant stakeholders in order to provide meaningful opportunities for their views to be taken into account in relation to planning/ decision making
15. Abstain from any improper involvement in local political activities

Question 21

What is the UN Global Compact?

Answer 21

• It is a United Nations body which supports companies to do business in line with UN global compacts ten principles and act to advance sustainable developments
• The compact has 120,000+ signatories in 170 countries

Question 22

What are the 10 principles within the UN Global Compact?

Answer 22

Human Rights

1. Business should support and respect human rights
2. Make sure not complicit in human rights abuses

Labour

3. Uphold freedom of association and right to collective bargaining
4. Elimination of all forms of forced and compulsory labour
5. Abolition of child labour
6. Elimination of discrimination in respect of employment

Environment

7. Support precautionary approach to environmental challenges
8. Undertake initiatives to promote greater environmental responsibility
9. Encourage development and diffusion of environmentally friendly technologies

Anti-Corruption
10. Work against corruption in all forms (extortion/ bribery)

Question 23

What is CSR reporting?

Answer 23

More aware that they need to report on their activties above level of disclosure required legally

• Companies attempt to report on direct and indirect supply chain impacts

DIRECT: easier to establish and report
INDIRECT: issues outside the company, so are harder to establish and measure

Question 24

What is the Global Reporting Initiative (GRI)?

Answer 24

Focuses on sustainability issues, raise awareness and understanding of these internationally.

Question 25

What are the principles set out in the G4 Sustainability Reporting Guidelines?

Answer 25

Principles for Defining Report Content (SSMC)

1. Stakeholder inclusiveness
2. Sustainability context
3. Materiality
4. Completeness

Principles for Defining Report Quality (CRABTR)

1. Balance
2. Comparability
3. Accuracy
4. Timeliness
5. Clarity
6. Reliability

Question 26

What does the triple bottom line cover?

Answer 26

1. Profit (economic)
   - info about impact on econ conditions of shareholders and system of both the area it operates and globally.
   - Policy regarding local and global economies and disclose targets and strategy for meeting those targets
2. Planet (environment)
   - Give info about how company impacts sustainable environment
   - Policies on waste emissions and pollution.
3. People (social)
   - Impact it has on social systems
   - Performance in areas of human rights and labour practices, including employer/ employee relations, occupational health and safety

Question 27

Why report on environmental & social issues

Answer 27

1. Accountability and transparency
   - reports increase transparency reducing agency problem further
   - disclosures may be in response to stakeholder concerns, address how they are being dealt with
   - Environmental accident, threaten company’s reputation
2. Business Case
   - Contain environmental risk, allowing company to better understand source of risk and how managed
   - Internal efficiency of operations, collecting info and understanding how its impact may lead to saved costs etc
   - Case is clear => reputational risk could threaten the company’s survival

Question 28

What are the arguments against CSR?

Answer 28

Milton Friedman: ‘The business is business’

• Company manager’s duty is to maximise shareholder wealth within the law
• any other activities = ‘theft’
• shareholders donate to charity out of dividends
• higher profits => higher tax rev for govt