Corporate Leadership & Social

Responsibility
(CLSR)
The incorporation of a holistic CSR perspective within a firm’s strategic
planning and core operations so that the firm is managed in the interests of a
broad set of stakeholders to achieve maximum economic and social value over
the medium to long term.

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 LP-7
19 – 26 Nov 18

• CLSR: The rights and responsibilities assigned to private

industry.
• Learning Objectives
– Understanding Concepts and key issues involved in CSR
– Introduction to Key CSR drivers
– Appreciating Implications for the enterprise / firm
– Implications for development of CSR as a cohesive measure for
the benefit of the society
• Learning Outcomes
– On completion of this lecture students would have a fair idea of
CSR and its relationship both for the firm and the society

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 MAJOR CONCEPTS OF CSR
• Economic and Legal ---- Firms have responsibilities to
societies including economic, legal, ethical and
discretionary (or philanthropic). (Carrol, 1979)
• Social Contract --- There is a tacit social contract between
the firm and society; the contract bestows certain rights in
exchange for certain responsibilities.
(Donaldson, 1982; Donaldson and Dunfee, 1999)
• Stakeholder Theory --- A stakeholder is “any group or
individual who can affect or is affected by the achievement
of an organization's purpose.” Argues that it is in the
company’s strategic interest to respect the interests of all
its stakeholders. (Freeman, 1984)

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 KEY ISSUES IN CSR

• Labour Rights:
– Desist from Child labor – under the age of 14 years
– No Forced labor – Jails etc
– Women rights to be protected
– Right to organize be recognized and implemented
– Ensuring safety and health (QwL)
• Environmental Conditions
– Treatment of sewage water & control of toxic air
emissions
– Not to negatively impact environment (Forests)
– Make due efforts to ensure climate change / climate
control / warming of Oceans

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 KEY ISSUES IN CSR– Contd
• Human Rights
– Cooperation with paramilitary forces to maintain law
and order
– No complicity in extra-judicial killings
– No uprooting of people to facilitate industrial growth
– Not to affect sustenance of local people
• Poverty Alleviation
– Ensure Job creation
– Enhance Public revenues – pay taxes and levies
– Enhance Skills and introduce modern technology

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 CSR IN GLOBAL CONTEXT

• Liberalization of markets – reduction of the

regulatory approach / duties
• Emergence of global giants, consolidation of
market share
• Development of the ‘embedded firm’ and the
global value chain including development of
supplier networks in developing countries

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 EMBEDDED FIRM

• Functions of the firm include the furthering of

prosperity for shareholders and stakeholders such
as employees, creditors, and the community at
large, guaranteeing of employee pension plans,
investing in R&D and in disseminating resulting
knowledge, as well as engaging in the protection
of the environment or observing cultural
requirements and human rights standards in the
firm's operation in various political contexts.

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 KEY DRIVERS OF CSR

Around the World Developing Countries

• NGO Activism • Foreign customers
• Responsible investment • Domestic consumers
• Litigation issues • FDL
• Govt. & IGO initiatives • Government & IGO

FDL : Foreign Direct Liability

IGO : Inter- governmental Organization

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 KEY DRIVERS: NGO ACTIVISM

• Facilitators: IT (Internet), media especially social

media, Low cost travel (Economy Travelling adding to
pollution)

• Boycotts, brand damage, influencing legislation,

• Domino effect resulting due to activities by Shell in

Nigeria, Exxon in Cameroon, Sinopec in Sudan,
Apparel Industry (Nike, Gap), GMO, Wood
Products(IKEA), etc.

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 KEY DRIVERS---LITIGATION

• Foreign Direct Liability

• Alien Tort Claims Act (ATCA): Human rights,
environmental rights
$30,000,000 settlement
o Unocal Burma

o Coca-Cola Columbia -----
o Rio Tinto Papau New Guinea
o Del Monte Guatemala
o The Gap Saipan
o Shell Nigeria Other tools: RICO, False Advertising
– E.g. Saipan ‘sweatshop’ cases; Katsky v. Nike

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PRINCIPLES FOR RESPONSIBLE INVESTMENT
www.unpri.org
The United Nations-supported Principles for Responsible Investment
is an international network of investors working together to put the
Six Principles for Responsible Investment into practice.
Signatories will
1 …incorporate ESG (Environmental, Social, and Corporate Governance)
issues into investment analysis and decision-making processes.
2 …be active owners and incorporate ESG issues into their
ownership policies and practices.
3 …seek appropriate disclosures on ESG issues by the entities in
which they invest.
4 …promote acceptance and implementation of the Principles within
the investment industry.
5 …work together to enhance their effectiveness in implementing the
Principles.
6 …each report on their activities and progress towards implementing
the Principles.
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 United Nations Initiatives
• The United Nations Global Compact --- a voluntary
initiative based on CEO commitments to implement
universal sustainability principles and to undertake
partnerships in support of UN goals.
• UN Principles for Responsible Investment
• UNEP ---- Equator Principles
• ILO --- Labor organization –a Tri-Partite Declaration of
Principles concerning Multinational Enterprises and Social
Policy (MNE Declaration)
• UNHCR --- High Commissioner for Human Rights
• UNODC -- Drugs and Anti-corruption
• UNCTAD – Conference on trade and development --- a
Corporate Responsibility reporting World Investment Report
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 IMPLICATIONS FOR ENTERPRISES

• New social and product liability CSR Drivers

patterns

• Development of Codes of
Conduct and CSR reporting Transnational Corporations

• Expanding sphere of influence

– Application of Code of Conduct
to value chain
– CSR management: value
chain management = The Extended Firm
compliance management Regional Plants / JV Partners
Suppliers / Distributors

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 IMPLICATIONS FOR ENTERPRISES:
TRANSNATIONAL COMPANY

• Every individual and every organ of society [should]

promote respect for these rights and freedoms and to
secure their universal and effective recognition.” - UN
International Declaration of Human Rights
• It would be a strange tort system (Common Law) that
imposed liability on State actors but not on those who
conspired with them to perpetrate illegal acts through
coercive use of state power. - (1997 Eastman Kodak Co. v.
Kalvin)
• International principles apply to governments and
companies

Transnational Company– in which pressures for local adaptation and lowering

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 IMPLICATIONS FOR ENTERPRISES
CSR MANAGEMENT

• How do companies address socio-environmental & legal

compliance issues?
• Three steps:
– Policies - Code of Conduct
– Systems - Compliance Management
– Reporting - Accounting and Reporting

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 CSR MANAGEMENT-- SYSTEMS APPROACH

• Sustainable business development does not come

about on its own accord. Rather, commitment to
sustainability demands that corporate processes be
reliably controlled and that everyone's actions - in
finance as much as in environmental and social areas -
be co-ordinated.

• Prerequisites for this are binding guidelines,

unambiguous corporate goals and a clear
organizational structure.

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 CSR Management:
Management structure

Example: Chiquita

Board of Directors Audit Committee

of Board

President & CEO

Group Chief VP of General Corporate Steering

Presidents Financial Human Counsel Responsibility Committee
Officer Resources Officer

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 CSR MANAGEMENT

Do
Plan
• Establish management
• Consult stakeholders
systems and personnel
• Establish code of conduct
• Promote code compliance
• Set targets
•Provide Finances

Act Check
• Corrective action • Measure progress
• Reform Systems, • Audit
Processes and Procedures
• Report
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 CODE OF CONDUCT
Issue emphasis varies by industry

Heavy
Industry

Light Environment
Industry
Fair Employment &
Labour Rights
Services
Rule of Law

Fair Business Practices

Technology

Multi-Sector

0 20 40 60 80 100

% of Codes addressing issue

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 SPHERE OF INFLUENCE

Who – is to be influenced?

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 SPHERE OF INFLUENCE

What – issues are to be influenced?

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 SPHERE OF INFLUENCE

How – are those issues to be influenced?

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 SPHERE OF INFLUENCE
Example: Mattel
Who: Suppliers, JVs and branch plants
What: OSH (Occupational Safety & Health)
How: Focus on manufacturing processes, HR, factory design

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 CSR MANAGEMENT:
GOVERNING THE VALUE CHAIN

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 COMPLIANCE MANAGEMENT:
MANAGEMENT BY CERTIFICATION

ISO 26000: Social Responsibility

• Introduced in 2009 or 2010
• NOT a Management System (?)
• NOT a Certifiable Standard (?)

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 PRINCIPLES OF SR

1. Ethical behaviour
2. Respect for rule of law,
3. Respect for international norms of behaviour
4. Respect for and considering of stakeholder
interests
5. Accountability
6. Transparency
7. Precautionary approach
8. Respect for human rights

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 ISO 26000 Roadmap
Principles of SR
1. Ethical behaviour 2. Respect for rule of law, 3. Respect for international
norms of behaviour, 4. Respect for and considering of stakeholder interests,
5. Accountability 6. Transparency, 7. Precautionary approach 8. Respect
for human rights

Core Subjects Implementing SR

Working With Stakeholders
Organizational Governance

Defining Integrating
scope into organization
Fair operating practises
Community & society

Implementing
Consumer issues
Labour Practises

Human Rights

development
Environment

in daily practise
Evaluating
performance
Enhancing
credibility
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Communicating
 CSR Management:
Emerging standards in CSR Reporting

Global Reporting Initiative (GRI)

A multi-stakeholder initiative
www.globalreporting.org

International Standards of
Accounting and Reporting (ISAR)
A project of UNCTAD
www.unctad.org/isar

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 IMPLICATIONS FOR DEVELOPMENT

• CSR ‘cascade effect’ on members of the global value chain

– Labor conditions (e.g. OSH, right to organize, wages)
– Environmental controls
– Transfer of new management techniques

• Compensation for weak legal environment in LDCs (Least

Developed Countries)

• Impact on economic development & national

competitiveness?

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 IS CSR GOOD FOR GROWTH?

• CSR is liable to hold back the development of poor

countries through the suppression of employment
opportunities within them.”

• CSR’s adoption would reduce competition and economic

freedom, and undermine the market economy.” (A Fear)

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 William C. Fredrick contributed to an early definition of
corporate social responsibility.

• Social responsibility means that the business should

oversee the operations of economic systems that fulfil the
expectations of the public and this means in turn that the
economy’s means of productions and distribution should
enhance total socio-economic welfare.
• Social responsibility in our final analysis implies a public
posture toward society’s economic and human resources
and willingness to see that those resources are used for
broad social ends and not simply for narrowly
circumscribed interest of private persons and firm”.

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The World Business Council for Sustainable Development
CSR is a continuing commitment by business3

• To behave ethically
• To contribute in economic development to
improving the quality of life of the:
– Workforce and their families
– The local community and
– Society at a large

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 Format of CSR in Pakistan
• Corporate philanthropy
• Energy conservation
• Environmental protection measures
• Community investment and welfare schemes
• Consumer protection measures
• Welfare spending for under-privileged Classes
• Industrial Relations (IR)
• Employment of special persons
• Occupational safety and health (OSH)
• Business ethics and anti-corruption measures
• National-cause donations
• Contribution to national exchequer (Taxes)
• Rural development programs. (NRSP and BISP etc)

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 Org working for CSR in Pakistan
• Ministry of Commerce
• State Bank of Pakistan (SBP)
• Securities and Exchange Commission of Pakistan (SECP) Š
• Chambers of Commerce and Industry, Pakistan (CCIP)
• Ministry of Information Technology Š
• Oxfam (NOVIB) Š
• Global initiative reporting (GRI) Š
• Pakistan Compliance Initiative (PCI) Š
• Pakistan Centre for Philanthropy (PCP)
• International Labor Organizations (ILO)
• Responsible Business Initiative (RBI) Š
• United Nations Development Programme (UNDP) Š
• United Nations Industrial Development Organization (UNIDO)
• Institute of Chartered Accountants of Pakistan (ICAP)
• Institute of Cost and Management Accountants of Pakistan (ICMAP)
• National Commission for Human Development (NCHD)
• Global compact Foundation Pakistan (GCFP)

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 Thank you.
Next week we would do case
study on Coca Cola
already sent via email and also
hold a quiz of LP-7

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