CSR & Sustainable Development

1. Introduction and background

Definition 1: CSR is a corporation’s initiative to assess and take responsibility for the
company’s effects on environmental and social wellbeing.

Today it is believed that company have a bigger responsibility than just making a profit.

Definition 2: CSR is the continuing commitment by business to behave ethically and

contribute to the economic development whole improving the quality of life of the
workforce as well as that of the local community and society at large.

Why is CSR important?

- Environmental concerns
- Treatment or workers
- Dangerous products

Google Example:
- Google Green:
o Shifting away from “short-sighted consumer electronics” and move towards
development of “green technology”
o Example: App (“Prediction”) that help Automobiles know where you are
going and then making the performance more efficient. This technology,
called Prediction, maximizes fuel and power consumption, which effectively
reduces carbon emissions.
- Google invests heavily in the support of nonprofit organizations (Money investments
and Googler volunteering hours)
- Google has been carbon neural since 2007. Google also advocate carbon neutrality in
every aspect of its internal affairs.

What is the payoff of CSR initiatives?

- Better public image: this builds up things like customer loyalty.

- Better media coverage: It’s better to be on the news for the good that you have done
rather than the other way around.
- Boosts employee engagement
- Attain and retain investors
- More volunteer participation
- Varied sources of revenues

History of CSR
1950-60s – Introduction to CSR
1970s – Rapid growth
- CSR becomes a discipline within the management field
1980s – Stakeholder theory
-
1990s – CSR Practicing
2000s and onwards: Empirical study

William Frederick:
- Responsible for a history of CSR
- The concepts of CSR come from:
o Institutional
o Intellectual
Howard Bowen:
- Social Responsibilities of the Businessman (1953) is considered the foundation for
the study of corporate social responsibility (CSR). 
- Business man have more responsibility than making money.
Keith Davis:
- Wrote 5 propositions that a company should follow to be socially responsible
- Businesses should listen to the public to know what could be done better to improve
society.
- A company has power than you have responsibility and that goes way beyond just
making money
Milton Friedman:
- Against CSR and almost caused the slow down.
- “Friedman introduced the theory in a 1970 essay for The New York Times.
In it, he argues that a company has no "social responsibility" to the public or
society; its only responsibility is to its shareholders.”
AB Carroll:
- Pyramid of CSR
- https://www.tutor2u.net/business/reference/carrolls-csr-pyramid
Edward Freeman:
- A company real success lies in satisfying all the stakeholders and not just the ones
who stand to profit from investment in their stocks.
- You cannot last as a profitable business if you don’t pay attention to your
stakeholders.
John Elkington:
- If you really want to have an idea of how healthy your company is you have to
analyze according to three P’s: People, Planet and profit  the triple bottom line.

2. Key Players

The Global Compact

The UN has been involved in CSR for a long time.

What are the primary aims of the UN:
- Secure international peace
- Protect human rights
- Eliminate poverty
What are the goals of U.N Global Compact?
 Having a peaceful, fair and health world, without corruption.
 Promote better understanding of corruption and anti-corruption measures.
o Issues: Implementations

Important idea: The expression of the global compact goes through 10 principles that are
expressed in 4 critical areas.

10 Principles of Global Compact:

2 principles from Human Rights

1. Businesses should support and respect the protection of internationally
proclaimed human rights, within the scope of their influence.
2. Businesses should make sure that they are not complicit in human rights abuses.
4 principles from Labor Standards
3. Businesses should uphold the freedom of association and the effective
recognition of the right to collective bargaining.
4. Businesses should uphold the elimination of all forms of forced and compulsory
labor.
5. Businesses should uphold the abolition of child labor.
6. Businesses should uphold the elimination of discrimination in respect of
employment and occupation.
3 principles from environment
7. Businesses should support a precautionary approach to environmental changing.
8. Businesses should undertake initiatives to promote greater environmental
responsibility.
9. Business should encourage the development and diffusion of environmentally
friendly technologies.
1 principle from anticorruption
10. Businesses should work against corruption in all its forms, including extortion and
bribery

Global Compact Strength Global Compact Weaknesses

 Comprehensive view of  Self-reporting by companies

stakeholders  Weak commitment by companies
 Facilitate interaction with  Minimal accountability
stakeholders  No clear criteria for evaluation
 Fosters mutual learning  Unclear membership
 Largest corporate citizenship requirements
network
 International standards and laws
 Increases awareness of human
rights

The CEO of the company needs to write a letter to the general secretary of the UN in order
to be a part of it (background check ect…)
To remain part of the Global compact:
- Need to report to the UN annually in terms of what you are doing and how much
progress you are making.

The ten principals of the global compact are expressed in the form of 17 Sustainable
development goals (SDG’s)

17 Sustainable Development Goals

1. No poverty 1. Renewable energy 13. Climate action

2. No hunger 2. Good jobs and 14. Life below water

3. Good health
4. Quality education
5. Gender equality
6. Clean water and
sanitation
economic growth
3. Innovation and 15. Life of land
infrastructure
4. Reduced 16. Peace and justice
inequalities
5. Sustainable cities 17. Partnerships for the
and communities goals
6. Responsible
consumption
New definition of CSR
The new EU directives, in 2011 give us a new definition of CSR:

“CSR refers to companies taking responsibility for their impact on society. The European
Commission believes that CSR is important for the sustainability, competitiveness, and
innovation of EU enterprise and the economy”

This agreement had to be approved by all countries

1996 – CSR Europe 2005 – European roadmap 2014 – EU directive on non-

for business financial reporting
2002 – Fist European 2010 – Enterprise 2020 2018 – Non-financial
strategy on CSR reporting
(Companies>100employees)

Non-financial reporting:
EU law requires large companies to disclose certain information on the way the operates
and manage social and environmental challenges.
From 2018, companies are required to include non-financial statements in their annual
informs.
Who has to File a NFR (Non-financial reporting) Disclosure?
The Directive will apply to large public-interest entities with more than 500 employees
(approx. 6000 large companies and groups across the EU)

4 criteria
 Environment
 Social and employee matter
 Respect for human rights
 Anti-corruption and bribery

5 Content Areas
 Business model
 Policies, including due diligence processes implemented
 Outcome of policies
 Principal risks and how they are managed
 KPIs (key performance indicator)

CSR around the world:

USA:
- CSR team in the bureau of economic and Business affairs.
- Provide a holistic approach to CSR
- Provide guidance
 - Encourage the adoption of corporate policies that help companies “Do well by doing
good”
- Far from requiring companies to share non-financial information like in EU

India:
- Adopted a mandatory CSR contribution legislation
- Companies are encouraged to spend 2% of their avg net profit in terms of CSR.
- CSR is seen as a voluntary activity.

China/South Africa:
- Mandatory reporting obligation on the amount spent on CSR activities

Not every country in the world needs to submit non-financial information like in the EU
however little by little more and more is being done in terms of CSR around the world.

3. CSR reporting Frameworks

CSR has become a business  many consultancy firms sell their services to do your CSR
reporting for you (some are good, and some are less good)

Major frameworks:
- UN global compact
- OECD guidelines for MNC’s
- ISO 26000

EU gives a lot of liberty on which one to use.

ISO 26000: Social responsibilities 7 principles:

- Gives best practices in terms of CSR:
o Accountability
o Transparency
o Ethical behavior
o Respect for stakeholder interests
o Respect of legal
o Respect international norms of behavior
o Respect for human rights
- Many big companies use ISO 26000 as the framework as it is very reputable.
- Strengths:
o Harmonizing behavior in terms of CSR at an international level
o Global acceptance (Marks and Spencer’s, Toyota …
o Very comprehensive standards

OECD (organization of economic cooperation and development) guidelines for MNC’s

- One of the oldest standards (1976) being updated with time (last updates 2011)
- Content:
o Human rights
 o Environment
o Info disclosure
o Combating bribery
o Consumer interests
o Science and technology
o Competition
o Employment and industrial relations.

Why chose these three frameworks?

- Aim to establish a common international basis for business conduct

- The three frameworks are complimentary (a company can use multiple)
- Reflect common global expectations.

Fourth Framework: Global Reporting Initiative (GRI)

You can use this framework in the EU if you want.

4. Stakeholder theory and the triple bottom line

Edward Friedman: “The quickest way to destroy shareholder value is to ignore stakeholders”

He found that there was too much exclusive attention to shareholders and not enough on
stakeholders.

Stakeholder Theory: It is based on the assumption that businesses can only be considered
successful when they deliver value to the majority of their stakeholders.

It affirms that those whose lives are touched by a corporation hold a right and obligation to
participate in directing it.

3 main questions:
1) What is their legitimate claim on the business?
2) What rights do they have with respect to the company’s action?
3) What kind of responsibility and obligations can they justifiably impose on a particular
business?

Boards must pay more attention to what is happening and being said outside of the
shareholder group and listen more to their stakeholders in general.

Stakeholder: A stakeholder is a person who is potentially concerned by what the enterprise

does or does not do indirectly or directly.

- Shareholders
- Employees
- Creditors
- Gvt
 - Suppliers
- Customers
- Local businesses

Stakeholders are important because, according to Friedman you cannot operate long-term
without the support of the community.

Stakeholder mapping:

1) Identify Stakeholders
2) Prioritize
3) Understand Stakeholders
a. What interests to they have in your work?
b. …
4) Managing

Collective bottom line

The purpose of the firm is to maximize profit on a collective bottom line, with profit defined
not as money but as human welfare.

The idea is that we are not only focusing on money (to be share with shareholders) we need
to look at what can and needs to be done in order to promote the welfare of our other
stakeholders as well.

Stakeholders capitalism:

Shareholders capitalism is a market system in which companies serve the purpose of their
shareholders.

Stakeholder capitalism is a market system in which companies treat the interests of all
major stakeholders roughly equally, rather than explicitly favoring investors
(For example, paying out less dividends and investing in other activities betters the lives of
other shareholders)

The Triple Bottom Line (John Elkington)

The success of a business must be measured not only by its profits but also by the impact
that business’ activities have on the planet (environment) and its people (social).

Profit, Planet and People  3P’s

 5. CSR and sustainability

The central idea behind CSV (Creating Shared Value) concept is the interdependency
between the competitiveness of a company and the health of the communities to which it is
connected.

“You create shared value by enhancing the competitive position of a company while at the
same time advancing the society in which it operates” Michael Porter & Mark Kramer

3 Levels of CSV:
- Enable local cluster development: Activate supply chain to enable growth and
productivity.
- Redefine productivity in the value chain: Improve resource efficiency and reduce cost
of operations and its impact.
- Recreate products and markets: Grow revenue through new or improved products
and services to address social issues.

CSR is all about doing good, philanthropy, separate from profit maximization, CSR is
something you do on the side.
CSV is about linking the economic side of things with doing good as there is a monetary
value linked it. CSV is linked to strategy and it is an integral part of your way to compete.

CSR VS CSV

CSR CSV
- Investing is being a good - Changing how to core business
corporate citizen operates to deliver triple bottom
line returns
- Integrating social and
environmental impact into de
business to drive economic value

- Value: doing good
- Citizenship, philanthropy and
sustainability.
- Discretionary or in respond to
external pressure.
- Separate from profit
maximization
- Agenda is determined by external
reporting and personal
preferences
- Impact limited by corporate
footprint CSR budget.
- “Example: Fair trade purchasing”
- Find business models that
improve the well-being of society
and earn a profit
- Value: Economic and societal
benefits relative to cost.
- Joint company and community
value creation.
- Integral to competing.
- Integral to profit maximization.
- Agenda is company specific and
internally generated.
- Realign the entire company
budget.
- “Example: Transforming
procurement to increase quality
and yield”

Greening the Value chain:

Supply chain management is the oversight of materials, information, and finances as they
move in a process from supplier to manufacturer to wholesaler, to retailer to consumer.

Greening the value chain means including environmental thinking into the whole of our
supply chain.

Companies are responsible for products from the upstream to the downstream (after sales).

Green Supply Chain Management

Integrating environmental thinking into supply management, including product design,
materials sourcing and selection, manufacturing processes, delivery of the final product to
the consumers, and end-of-life management of the product after its useful life.
Benefits of Green Supply Chain Managements

Financial Benefits Environmental Benefits Social Benefits

- Increased revenue - Reduced Waste - Reduce
- Reduced costs - Increased Energy Community
- Increase Asset Efficiency Impacts
Utilization - Reduced Air - Noise Reduction
- Enhance Emissions - Trafic Congestion
Customers Services - Reduced Water Avoidance
Emissions - Health
- Reduced Fuel - Safety
Consumption - Security

Areas to Green the supply chain:

 Designing of products
 Production
 Material purchase
 Packaging
 Warehousing
 Logistics & reverse logistics