Chapter 4 Corporate Social Responsibility Flashcards
What is corporate social responsibility?
- 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
What is the meaning of CSR?
Companies should not operate in isolation without consideration of its environment
What concerns does CSR incorporate?
> Sustainability > Ethical Corporate Behaviour > Environmental Protection > Support for Human Rights > Fair Working Practices > Supply Chain Management > Equality & Diversity > Community Involvement
What are the economic examples of sustainable reporting?
- Performance
- Market Presence
- Economic Impact
- Procurement
What are the environmental examples of sustainable reporting?
> Materials > Energy > Transport > Emission > Compliance
What is enlighted self interest?
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
What are the different categories of stakeholders?
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
What is the primary obejctive of a company?
To maximise shareholder wealth which is to maximise the present values of the company’s future cash flows
What does maximising shareholder wealth mean?
- Minimising the wages paid to employees and prices paid to suppliers
- Getting as much out of customers for as little as possible in return
- Exploiting the natural environment
Exploiting wealth only => open conflict with other stakeholders
What are the four ethical stances towards CSR set out by Johnson & Scholes?
- Short-term shareholder interests - concentrate on shareholder wealth and pay its tax on its profits
- Long-term shareholder interests - considering deeper ethical responsibilities enhances company’s image. Reputational benefits of being ethical outweigh the costs.
- Multiple stakeholder obligations - companies should respect the expectation of stakeholders other than the shareholders and make this the company’s objective.
- Shaper of society - taking high moral stance to every stake holder (mainly public or not for profit organisations)
What is the 4-part CSR ‘pyramid’?
Philanthropic responsibilities = good corporate citizen
Ethical responsibilities = behave ethically
Legal responsibilities = obey the law
Economic responsibilities = be profitable
What are the four different strategies for CSR?
- Proactive strategy: where company is prepared to take full responsibility for its actions
- Reactive strategy: where the company only takes responsibility once an external entity prompts them to do so
- Defence strategy: Where company minimises to avoid any additional obligations arising from a particular problem
- Accommodation strategy: Where company responds differently each time by taking account of stakeholder’s views
What is the definition of supply chain?
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.
What is the definition of globalisation?
The increasing integration of internationally dispersed economic activity
What should a purchasing organisation make sure it complies with as a minimum?
- National laws and international agreements
2. Relevant international voluntary codes of practice and standards
What is a supply chain audit?
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.
What are the principles that reduce environmental impact in supply chains?
- Life cycle thinking - encourage reduction of products environmental behaviour, rewarding companies that are innovative, forward-thinking
- Work with the market - establish incentives for sustainable behaviour
- Stakeholder involvement - encourage them to act across their sphere of influence to support environment
- Continuous improvement - identifying and changing how a product impacts the environment across its life cycle
- Policy Instruments - the IPP started with voluntary standards but mandatory ones are possible
What is the strategic approach to CSR?
- Means allocating appropriate available resources to socially responsible objectives in order to boost competitive advantage.
What is the OECD?
It publishes guidelines for multinational enterprises. Contain 15 general policies on CSR => non-binding principles, have the status of recommendations
What are the 15 OECD general policies on CSR?
- Contribute to economic, environmental and social progress
- Respect internationally recognised human rights of those affected by their activities
- Encourage local capacity building through close co-operation with the local community, including business interests, as well as developing the companies activities
- Encourage human capital formation
- Refrain from seeking or accepting exemptions not contemplated in the statutory or regulatory framework
- Support and uphold a good corporate governance principles and practices
- Develop and apply effective self-regulatory practices and management systems that foster a relationship of confidence and mutual trust
- Promote awareness and compliance by workers employed
- Refrain from discriminatory or disciplinary action
- Carry out risk-based due diligence
- 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
- Seek to prevent or mitigate an adverse impact where they have not contributed to that impact but linked directly to their operations
- Addressing adverse impacts in relation to matters covered by the guidelines encourage
- Engage with relevant stakeholders in order to provide meaningful opportunities for their views to be taken into account in relation to planning/ decision making
- Abstain from any improper involvement in local political activities
What is the UN Global Compact?
- 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
What are the 10 principles within the UN Global Compact?
Human Rights
- Business should support and respect human rights
- Make sure not complicit in human rights abuses
Labour
- Uphold freedom of association and right to collective bargaining
- Elimination of all forms of forced and compulsory labour
- Abolition of child labour
- Elimination of discrimination in respect of employment
Environment
- Support precautionary approach to environmental challenges
- Undertake initiatives to promote greater environmental responsibility
- Encourage development and diffusion of environmentally friendly technologies
Anti-Corruption
10. Work against corruption in all forms (extortion/ bribery)
What is CSR reporting?
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
What is the Global Reporting Initiative (GRI)?
Focuses on sustainability issues, raise awareness and understanding of these internationally.
What are the principles set out in the G4 Sustainability Reporting Guidelines?
Principles for Defining Report Content (SSMC)
- Stakeholder inclusiveness
- Sustainability context
- Materiality
- Completeness
Principles for Defining Report Quality (CRABTR)
- Balance
- Comparability
- Accuracy
- Timeliness
- Clarity
- Reliability
What does the triple bottom line cover?
- 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 - Planet (environment)
- Give info about how company impacts sustainable environment
- Policies on waste emissions and pollution. - 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
Why report on environmental & social issues
- 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 - 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
What are the arguments against CSR?
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
