theme 9 Flashcards
Corporate social responsibility (CSR) pillars
Businesses cannot ignore anymore those request requirements and trends that play an important role how they conduct business
• Pillar principle of governance
o The way of governing and decision making the company
• Pillar planet
o Companies cannot ignore the environment and the pollution anymore
• Pillar people
o The way we deal with people, employees, customers
• Pillar prosperity
o how to focus on profitability and prosperity
explain the shareholder model vs the stakeholder model
For example, if you ask companies how will they cut their losses and increase profit after covid-19
• In Britain and the US, they will say we will fire employees to maintain dividends for the shareholders because they say that they work for the shareholders and that is their main target. They will do anything to increase profitability which is related to shareholder’s right
• The other countries will say that they will maintain their employee’s jobs and won’t cut the wages to pay profitability for shareholders
So it comes down to if you prefer shareholders or stakeholders
In the shareholder’s theory that is dominant in the USA means that whatever you do, as a manager or an employee will be in the interest of shareholders
In the stakeholder’s theory like in most EU you do whatever it takes in the interest of employees and customers
how to take a decision wisely ?
what is the difference between a smart and wise leader ?
there are 3 level of taking a decision
1-Commercial
2- Reasonable
3- Responsible (wise)
- As a leader and a manger you should be commercial and have the competencies to do the right thing
- Reasonable making good decisions that are innovative and reducing biases
- Taking responsible decisions which means that looking at socio-ethical and environmental sustainable decisions that are responsible
So a smart leader is somebody that determines the success of the organization he leads by one hand reducing uncertainty errors which means the reducing biasness and making better decisions by also being creative and innovative which will create success
A wise leader needs to have more variables related to risk intelligence and emotional intelligence
So success is a summation of skill set (reducing errors and being creative and innovative) and including wisdom by having a broader perspective by including other stakeholders
what is ESG factors?
- Environmental factors ( Carbon footprint)
- Social factors ( human rights)
- Governance factors ( Board independent)
circular economy
Circular economy is a model of production and consumption which involves sharing, reusing and recycling, the model shows that tesla and other companies are doing their part in environmental sustainability and performance
Tesla is using circular economy and it is using solar panels on the roof of cars
Is fashion sustainable?
it takes a lot of co2 to make material for shoes and clothes, this process also uses a lar amount of water, transporting these material also is harmful for the environment and the product use which means washing them because washing machines are extremely harmful for the environment so even after buying the product you are affecting negatively the environment
allbirds company tries to solve this problem by making shoes that are still fashionable but using recycled material, they are reducing carbon emissions but the question stays to what extent are they really sustainable
business objectives and societal goals
it started after the three incidents of Nike’s sweatshops, shell oil Brent spar in Nord sea and Nestlé’s powder milk
It means that a company shouldn’t just achieve business objectives but also social objectives and there shouldn’t be a fight between businesses and societies, businesses can be a solution using their capabilities and resources for solving issues as global change and others
Inside out linkages: what companies can do from inside out to increase the societal objectives which means reducing threats and embracing trends that are important for society
Outside in: how to use Michael porters diamond to influence organizations which means because of the quality and quantity of human resources, government rules and regulations and because of demand it can lead to better and sustainable products
Example: McDonalds outbound logistics was using 10 years ago if you would have bought a big Mack it would be out into plastic or foam packaging which is not good for the environment, today they are using carton or degradable paper.
This means that in each of the value chain activities you can try to embrace the sustainability goals which are social or environmental without jeopardizing the profitability of the organization
CSR is becoming CSV
corporate social responsibility is becoming more corporate shared value
Example: the Marriott is a 5 start hotel chain in all over the planet but in each of the big cities in the US they have an Outlet. in Washington DC for a long time there is high unemployment among minority groups and people without the degrees necessary, this hotel decided years ago to take about 600 invite unemployed people from the street to be trained at the Marriott at the minimum salary mostly, and after 6 months of paid training the Marriott is average about 85% of them is offered a full time job.
The Marriott is obviously helping the society but there is also a benefit for the hotel and that is explained by knowing that people working in hotels especially the ones who clean work for a lot of hours and have almost above minimum wages which leads to a high turnover of employees and on average 25% of them are leaving the hotel to find a new employer which and recruiting people always cost money. The Marriott is training these people and giving them job they will much more loyal to you and the average turnover in that hotel only is 10% which is half of the industry.
Marriott is doing a great thing for society benefits (less unemployment) and at the same time reducing costs and benefiting the organization
Governance
- How you are looking at shareholders and stakeholders values and the result off that is basically translated into how board of directors are taking directions
- In Latin it means steering the ship away from rocks into open waters, in business it means taking decisions that minimizes negative threats and optimizing positive opportunities
- It is a set of relationships between the companies board with stakeholders and shareholders and provides structure of which companies objectives are set and which objectives are attained and monitored and achieved
- Mechanisms that helps the companies attain corporate and strategic objectives and monitors the performance of its managers
Tasks of boards of directors
- appoint or fire CEO
- Supervision of management
- minimize threats
- maximize profit
Schipol Amsterdaam airport case ?
Shcipol the airport in Amsterdam is using lamps for lighting and they are using Phillips, because of sustainability issues and circular economy these two companies joint force and change the business model and what they did is instead of using these LED lamps which are already more sustainable than normal lamps, the airport stopped buying lamps and started buying lightings which means Phillips is responsible to guarantee lights (the one hanging) and these lights have sensors that sends a message saying which light has to be replaced or maintained and of course it is in the interest of Phillips to make these lamps as sustainable as possible to last as long as they can
It changed the business model, so instead of selling lamps they are selling products as a service, the light now is more a service than a product which will lead to more effective use of the lamps ad better improvement of performance and maintaining more accurately, which also means making Phillips recycle more material because it is in their interest
