Strategic Corporate Social Responsibility - Final

Innovative Capabilities

(competencies) produce the most valued products and services in the most efficient manner. As a result, these firms are able to build and sustain a competitive advantage over the competition.

CSR vision statement

-Engages key stakeholders -Maps out -Involves the CEO's necessary endorsement and active support -Reinforces rewards and sanctions -Provides policies on day-to-day basis

Limitations of Resources Perspective

1) By focusing primarily on the internal characteristics of the firm as the source of competitive advantage, the resources perspective deemphasizes the external context in which the firm operates. 2) The resources perspective provides a description of the firm that is very deliberate and rational.

The Pyramid of Corporate Social Responsibility

1) Economic 2) Legal 3) Ethical 4) Discretionary (go beyond basic responsibility)

Limitations of Industry Perspective

1) It present business as a combative pursuit - zero-sum game of survival. 2) It presents a narrow view of the firm's operating environment. 3) It fails to give sufficient recognition to differences in characteristics among companies, which likely predict a firm's competitive success.

6 Principles of UN PRME

1) Purpose 2) Value 3) Method 4) Research 5) Partnership 6) Dialogue

CSR Implementation can also be broken down into two broad stages

1) Short to medium-term 2) Medium to long-term

3 components define the firm - environment relationship

1) Strategic interest of the firm. 2) the evolution of the issue. 3) the motivation fo the stakeholders.

The CSR Threshold applies at multiple levels of analysis:

1) Variation among companies - depending on whether it is the market leader or a smaller player. 2) Variation among industries - some industries are more susceptible to stakeholder backlash than others. 3) Variation among cultures - different societies place different expectations on corporations.

Four main questions that need to be addressed in CSR Reports

1) What will it look like for your company to be sustainable? 2) what do you need to do to get there? 3) how much progress have you made? 4) What are the big problems you still have to solve.

Four types of engaged stakeholders

1) caring - warrant action 2) informed - represent rational or economic motives for the firm 3) transparent - reveal which issues are on the minds of stakeholders 4) educated - corporate responsibility is integrated component

Five components essential in defining strategic CSR

1) firms incorporated a CSR perspective within their culture and strategic planning process. 2) any actions taken are directly related to core operations. 3) firms seek to understand and respond to the needs of their stakeholders. 4) firms aim to optimize value created 5) firms shift from a short-term perspective to managing their resources and relations with key stakeholders over the medium to long term.

Prioritizing Stakeholders

5 Steps of Stakeholder Prioritization: 1) Identify 2) Analyze 3) Prioritize 4) Act 5) Evaluate

Value Based Business

A genuine implementation of strategic CSR throughout operations lays the groundwork. They stand for something positive, something that both defines and unites the organization. Strategic CSR provides a road map to achieving this goal.

Corporate Social Responsibility

A responsibility among firms to meet the needs of their stakeholders and a responsibility among stakeholders to hold firms to account for their actions.

Strategic CSR Debate - Chapter 5

A stakeholder's responsibility to hold the firm to account is more important than the firm's responsibility to meet the needs and concerns of that stakeholder.

Stakeholder Involvement

All large publicly held corporations have well developed investor relations departments. The two-way avenue of communication with shareholders should be expanded to include a firm's broader set of stakeholders.

Is the Environment a Stakeholder?

An argument for including it as a stakeholder is to reinforce the importance of sustainability within the CSR debate, while recognizing that it requires actors to speak and act on its behalf in order to be protected.

Vision

Answers why the organization exists. It identifies the needs the firm aspires to solve for others.

A new definition of Stakeholder

Any entity who is affected by the organization (either voluntarily or involuntarily) and possesses the capacity to affect the organization.

Consequentialist

Justifies action in terms of the outcomes generated (the greatest good for the greatest number of people)

Ethical Argument for CSR

Based on two forms of reasoning - consequentialist (utilitarian) and categorical (Kantian).

Strategic CSR Debate - Chapter 15

Business is a moral endeavor.

What is Strategy?

Business: Survival depends on success Success = profits Profits = revenues - costs

CSR Definition in United Kingdom

Businesses and other organizations going above and beyond the legal obligations to manage the impact they have on the environment and society. Include how organizations interact with their employees, suppliers, customers and communities which they operate, as well as the extent they attempt to protect the environment.

CSR Definition in China

Company linking itself to ethical values, transparency, employee relations, compliance with legal requirements and overall respect for the communities in which they operate. Drives strategic decision making, partner selection, hiring practices, and brand development.

Economic Stakeholders

Consumers, shareholders, competitors, creditors, distributors/suppliers, unions

Simon Zadek - 5 stages of CSR learning

Defensive Compliance Managerial Strategic Civil

The two dimensions that consistently influence the role of CSR

Democracy and Economics

Strategy

Determines how to organization is going to undertake its mission. It sets forth the ways the organization will negotiate its competitive environment in order to attain a sustainable advantage.

CSR Perspective

Embedding the profit incentive within a framework of guiding values that set the parameters of decisions and guide employees in relation to the firm's strategy helps managers implement strategic CSR throughout all aspects of day-to-day operations.

Organizational Stakeholders

Employees, managers, directors

CSR

Evolves Fluid concept Means & End Process & Outcome

Short to Medium-Term Implementation - Examples

Executive Investment CSR officer CSR vision Performance metrics Integrated reporting Ethics code and ethics training Ethics helpline Organizational design

Milton Friedman's Argument

Few trends could so thoroughly undermine the very foundations of our free society as the acceptance by corporate officials of a social responsibility other than to make as much money for their stockholders as possible.

Nonprofits (NGOs)

Filling in needs that haven't been met by government. They work with government and for-profit to fill the gap they haven't yet met.

Resource Perspective

Firm's unique resources (highly skilled employees or monopoly assess to valuable raw materials) Capabilities (effective research and development or efficient production processes) Both are the main determinants of competitive advantage.

Stakeholder Perspective

Firms should seek to understand and respond to the needs of their broad range of stakeholders. A barrier is a primary emphasis currently given by many firms to the interest of their stakeholders. Firms should expand their view to include all stakeholders, who, collectively, define the operating environment. Firms have an interest not only in responding to stakeholder concerns but also in anticipating these concerns whenever possible.

Rational Agrument for CSR

Focuses on the benefits to performance of avoiding external constraints. Adopting the path of least resistance with regard to issues of concern makes common and business sense. In today's globalized world, where individuals and organizations are empowered to enact change, CSR represents a means of anticipating and reflecting societal concerns to minimize operational and financial sanctions.

Industry Perspective

Focuses on the firm's operating environment as the main determinant of its competitive advantage.

Critical Argument of CSR

For-profit sector is the largest and most innovative part of any free society's economy.

Categorical

Justifies action in terms of the principles by which that action is carried out (the application of the core ethical principles, regardless of the outcomes they generate).

Strategy Constitutes the how

Given this symbolic relationship, how the firm is evaluated by its stakeholders depends not only on what the firm does, but on how it does it.

Dave Packard's Argument

I think people assume, wrongly, that a company exist simply to make money. While this is an important result of a company's existence, we.... inevitably conclude that a group of people get together and exist as an institution that we call a company so that they are able to accomplish something collectively that they could not accomplish separately - they make a contribution to society, a phrase which sounds trite but is fundamental.

Post, Preston, and Sachs (2002) definition of Stakeholder

In a firm are individuals and constituencies that contribute, either voluntarily or involuntarily, to its wealth-creating capacity and activities, and who are therefore its potential beneficiaries and/or risk bearers.

Eric Rhenman (1964) definition of Stakeholder

In an organization are the individuals and groups who are depending on the firm in order to achieve their personal gals and on whom the firm is depending for its existence.

R. Edward Freeman (1984) definition of Stakeholder

In an organization is (by definition) any group or individual who can affect or is affected by the achievement of the organization's objectives.

Porter's Five Competitive Forces

Industry Rivalry Threat of new entrants Threat of substitutes Power of suppliers Power of buyers

VRIO

Is the resource Valuable? IS the resource Rare? Is the resource costly to Imitate? Is the firm Organized to capture this potential values?

Why is CSR important

It influences all aspects of a company's operations.

Strategic CSR is Not an Option

It is central to everything the firm does All business decisions have economic, social, moral, and ethical dimensions.

Strategic CSR is Not Sharing Value

It is creating value Business is the solution to market problems/opportunities that create value as a direct consequence. Firms optimize value Firms can often use their expertise to assist in meeting nonoperational goals, but this should not be their primary concern.

Strategic CSR is Not Caring Capitalism

It is market capitalism It is not the ends of capitalism that matter so much as the means by which those ends are pursued.

Prahalad and Hamel's Three Test

It should "provide potential access to a wide variety of markets" If "should make a significant contribution to the perceived customer benefits of the end product" It "should be difficult for competitors to imitate"

Medium to Long term

Managers change horizons to alter their priorities and decisions - next quarter to next season, next decade or beyond. If the CEO is concerned with the continued existence of the firm 5, 10, or 20 years, the value of building lasting, trust-based relationships with key stakeholders increases exponentially.

Societal Stakeholders

Media, regulators, local communities, nonprofit/NGOs

Medium to Long-Term Implementation

Over the longer term, the firm must institutionalize and externalize the substance of its CSR policies for stakeholders.

Ethics Code and Training

Record Expectations and the boundaries of acceptable behavior in the Ethics Code and reinforce those rules and norms via regular Ethics Training.

Moral Argument for CSR

Reflects the relationship between a company and the society within which it operates. It assumes businesses recognize that for-profit entities do not exist in a vacuum and that their ability to operate and achieve ongoing success comes from societal resources and consent as from factors that are internal to the firm.

What does CSR cover?

Relationship among corporations and the societies with which they interact. Responsibilities that are inherent on both sides of these relationships.

A series of steps helps further embed socially responsible practices throughout the organization

Risk analysis (firm wide audit) Policy statement (formation and announcement) Risk Management (monitor implementation and react to any issues) Reporting (transparency and stakeholder interaction) Review and revise (via a risk analysis update)

CSR's argument for economic interest

Satisfying stakeholders needs becomes central to retaining societal legitimacy (and financial viability)

Optimize Value

Seek a balance between the production and consumption activities in society in order to build a standard of living that meets the needs of the collective. (compromise, mediation).

For-Profits

Seek to make a profit but are an engine in our economy. We can't progress without them.

Economic Argument for CSR

Self-interest for business. CSR adds value because it allows companies to reflect the needs and concerns of their various stakeholders groups. By doing so, the firm is more likely to create greater value and, as a result, retain the loyalty and custom of those stakeholders. Simply put, CSR is a way of matching corporate operations with stakeholder values and expectations that are constantly evolving.

Governments

Setting up rules. Society needs a set of rules and also some enforcement.

Controversial Argument of CSR

Some see CSR as the distraction from the economic purpose of the business. (tobacco companies)

Medium to Long-Term Implementation Examples

Stakeholder engagement Marketing Corporate Governance Social activism

Mission

States what the organization is going to do to achieve its vision. It addresses the types of activities the firm seeks to perform.

Value Creation

Strategic CSR delivers an operational and strategic advantage to the firm. As such, it is central to the goal of value creation, which is the primary purpose of a firm's top management.

Core Operations

Strategic CSR will differ from firm to firm depending on each firm's expertise and the relevance of the issue to its vision and mission. Firms create value as a direct result of their unique mix od resources and capabilities. Firms define their niche and service in a competitive environment. Firms create the most value when it focuses on what it does best, which is defined by its core operations.

Three Focal Areas in which Strategic CSR can be implemented

Supply Chain - prefirm production Operations - internal production Consumption - post firm production

Strategic CSR Debate - Chapter 14

The CEO os the chief ethics officer

Dodge Vs. Ford

The company came up with a plan of ending the special dividend payments to the shareholders and invest the money in building more factories and employing more workers. Cutting cost and reduce the prices of the cars so that people can afford them. A shareholder of the company came up with the argument that the company's goal should be maximizing profits, instead of making more affordable cars.

Tactics

The day-to-day management decisions made to implement the firm's strategy.

The CSR Threshold

The decision of when to implement a CSR policy is compounded by why, where, and how it should be implemented.

Strategic CSR Debate - Chapter 10

The fast-food industry has passed its CSR threshold.

Strategic CSR

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 broad set of stakeholders to optimize value over the medium to long term.

Strategic CSR Debate - Chapter 4

The natural environment is a stakeholder of the firm.

Charles Handy

The purpose of a business is not to make a profit, full stop. It is to make a profit so that the business can do something more or better. (Profit - company) If you don't have enough of it, you are out to the game. But if you think your lie is about breathing you are really missing something. (oxygen - person)

Archie B Carroll's Agrument

The social responsibility of business encompasses the economic, legal, ethical, and discretionary expectations that society has of organizations at a given point in time.

Short to Medium-Term Implementation

The ultimate goal of implementation is for CSR to form an integral component of: 1) The firm's culture 2) Day-to-day operations

Strategic CSR Debate

There are no absolute ethical and moral standards: all values, norms, and laws in society are socially constructed and evolve over time.

Corporate Governance

Transparency and accountability have become the watchwords in order to make this effective.

CSR Definition in United Nations

Understood as a management concept and a process that integrates social and environmental concerns in business operations and a company's interactions with a full range of its stakeholders.

Strategic CSR Debate - Chapter 12

Unless tied directly to operations, corporate philanthropy is a waste of money.

Value-Based Business

Values are important because they are shared beliefs that "drive an organization's culture and priorities and provide a framework in which decisions are made." Core to what the firm does and how it plans for the future Assumes that profit alone is n insufficient driver od a successful component and motivator of people

Principle 3: Method

We will create educational frameworks, materials, processes and environments that enable effective learning experiences for responsible leadership.

Principle 1: Purpose

We will develop the capacities of students to be future generators of sustainable value for business and society at large and to work for an inclusive and sustainable global economy.

Principle 4: Research

We will engage in conceptual and empirical research that advances our understanding about the role, dynamics, and impact of corporations in the creation of sustainable social, environmental and economic value.

Principle 6: Dialog

We will facilitate and support dialog and debate among educators, students, business, government, consumers, media, civil society organizations and other interested groups and stakeholders on critical issues related to global social responsibility and sustainability.

Principle 2: Values

We will incorporate into our academic activities and curricula the values of global social responsibility as portrayed in international initiatives such as the United Nations Global Impact.

Principle 5: Partnership

We will interact with managers of business corporations to extend our knowledge of their challenges in meeting social an environmental responsibilities and to explore jointly effective approaches to meeting these challenges.

Morals vs. ethics

When we teach children not to steal, we are teaching them morality. When you have a conflict between two or more things that morality requires, that's when ethics steps ip to the plate.

Strategy + CSR (Symbolic relationship)

While stakeholders depend on the value that firms create, firms depend on their stakeholders for the resources that enable them to deliver that value.

Defining Strategic CSR

a pragmatic philosophy that is grounded in the firm's day-to-day operations. As such, it is central to value creation and, ultimately, the firm's success in the market.

Prioritize

among any competing stakeholder interests and demands in relation to the issue at hand

Identify

and engage the set of stakeholders that are relevant to the firm

Act

as quickly as is prudent, attempting to satisfy as many stakeholders as possible, in order to priority (while avoiding excessive harm to any one one stakeholder)

Strategic CSR is Business

creating value for a broad range of stakeholders by focusing on the firm's areas of expertise to solve market-based problems: It is not something the firm can choose to do; it is the way business is conducted. It cannot be ignored or relegated in importance.

Most effective Boards

form CSR sub-committee on which both the CEO and President sit

All stakeholders have an obligation to do what?

help design the society which they want to live and work. We live in a house we built.

Activism

important way for a firm to establish a corporate identity that attracts stakeholders and fulfills the firm's mission and vision. Must support an economically viable business strategy Does not preserve an operation of basic economical, legal, or other business fundamentals are missing.

Firms do not define our societal values

instead they reflect them

CSR Definition in European Union

process of integrating social, environmental. ethical and human rights concerns into their business operations and core strategy in close collaboration with their stakeholders.

Firms are very good at providing us with what we actually want

rather than what we say we want

Corporate Social Responsibility suggest that

such behavior is the responsibility of corporations - that the corporation has a responsibility to society. The responsibility is defined by society Society consists of all of the firm's stakeholders.

Evaluate

the effect of the action to optimize the outcomes for the firm and its stakeholders. When necessary, repeat the process.

Analyze

the nature of the issue to see how it related to firm operations and what stage it is at in its evolution

Lobbying

useful way for firms to interact with elected representatives. In order for such activities to be considered socially responsible, managers should follow a clear set of principles.