Chapter 3

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- 1970s: business was deemed ethical if it followed the law - if citizens fail to meet there responsibilities they go to jail - Economic and social goals come together in companies that practice enlightened self-interest - businesses have the ability to solve many issues in the world due to their power and money, but they have to have the mentality - #1 reason for not making a good decision = not enough information - An emerging trend in corporate reporting is the integration of legally required financial information with social and environmental information into a single integrated report.

The Meaning of Corporate Social Responsibility

- Act in a way that enhances society and its inhabitants and be held accountable. - Acknowledge any harm to people and society and correct it if possible. - May forgo some profits if its social impacts hurt its stakeholders or if its funds is usable for a positive social impact.

Corporate Power

- Capability of corporations to influence government, the economy, and society, based on their organizational resources. - The tremendous power of the world's leading corporations has both positive and negative effects. Positive: give back to community - more resources - lower cost production - new products - technologies Negative: build up companies - Disproportionate political system - Dominate public course - Divide markets - Squash competition

Multiple responsibilities of business include

- Economic responsibilities - Social responsibilities - Legal responsibilities "Challenge is to balance all three." Three legged stool Successful firm is one which finds ways to meet each of its critical responsibilities and develops strategies to enable the obligations to help each other. (A business isn't deemed successful or doing a good job with the question of making money or not. you need to balance all 3).

Phases of Corporate Social Responsibility

- Frederick provides expanded framework for understanding the evolution of CSR concept. 1. Corporate social stewardship 2. corporate social responsiveness 3. corporate/ business ethics 4. corporate/ global citizenship

The Origins of Corporate Social Responsibility

- In the United States, the idea of corporate social responsibility appeared around the start of the 20TH CENTURY. - CORPORATIONS under attack for being TOO BIG, TOO POWERFUL, and GUILTY of ANTISOCIAL and ANTI COMPETITIVE PRACTICES - To use their power and influence voluntarily for broad social purposes rather than for profits alone. TO USE POWER TO NOT ONLY BENEFIT THEM IN PROFIT Example: Steelmaker Andrew Carnegie, Henry Ford

The Reputation Index

- It EVALUATES critical INTANGIBLE ASSETS that constitute corporate reputation. - Rating Research, a British firm, DISTRIBUTES THE INDEX AND RATINGS TO INTERESTED PARTIES.

The B Corporation

- Must meet rigorous, independent social and environmental performance standards. - Focus on social responsibility and citizenship by blending their social objectives with financial goals. - B Corporation must prove its socially responsible by meeting the B Lab standards. - B Lab is a non-profit organization that assesses a corporation's social and environmental performance standards. (B corp is a voluntary group of organizations that place themselves in the part of the problem and try to fix the business industries social issues). Purpose: to create benefit for all steakholders

Corporate Citizenship:

- The actions they take to put their commitments to corporate social responsibility into practice. - The term global corporate citizenship, similarly, refers to putting these commitments into practice worldwide. when profits are put before value the business runs into trouble

Businesses for Social Responsibility (BSR) survey:

- The goal of a global citizenship management system is to integrate corporate responsibility and citizenship concerns into a company's values, culture, operations and decisions at all organizational levels. - One emerging trend is the consolidation of corporate citizenship efforts. Citizenship Has an opportunity to: - Create value for their organization - Gain a competitive advantage - Help address some of the world's biggest challenges Being environmentally or socially responsible can be a competitive advantage for a business. Ex: subaru and creating the Pzev cars (no pollution or waste in the manufacturing).

Transparency

- When companies clearly and openly report their performance—financial, social, and environmental. Example: Australia, New Zealand

ways to stop businesses if they do not use their power responsibility

- boycott - gov't implements laws - society disagrees with expansion into certain areas

Companies demonstrate their corporate citizenship by

- proactively BUILDING STAKEHOLDER RELATIONSHIPS - DISCOVERING BUSINESS OPPORTUNITIES IN SERVING SOCIETY - transforming a concern for financial performance into a vision of integrated financial and social performance

Iron law of responsibility

- says in the long run, those who do not use power in ways that society considers responsible will tend to lose it.

The company's self-interest in the long term to provide:

- true value to its customers - to help its employees grow and behave responsibility Example: Nestle, Southwest (only company to be profitable every quarter for 30 years. they also did not lay off employees when they were grounded for three days during 9/11 like many other airlines did.

Three different ways of social audit standards

1. Companies can develop standards designed to set expectations of performance for themselves or their suppliers or partners. Example: Apple (ISO) SETTING STANDARDS AGAINST COMPETITORS OR THEMSELVES 2. Companies within an industry can agree on a common industry-wide standard. Example: (EICC) ENTIRE INDUSTRY DECIDES ON INDUSTRY WIDE STANDARDS 3. Can be developed by global nongovernmental organizations or standard-setting organizations. NONGOVERNMENTAL ORGANIZATION SETS STANDARDS Example: International Organisation for Standards, AccountAbility (AA), United Nations Global Compact, The Global Reporting Initiative and others. Mazlows heirarchy of needs: different for employees globally vs. domestically

6 Benefits of Social audits by Simon Zadek

1. Help businesses KNOW WHAT IS HAPPENING WITHIN THEIR FIRM 2. UNDERSTAND WHAT STAKEHOLDERS THINK ABOUT THEIR BUSINESS 3. TELL STAKEHOLDERS WHAT THE BUSINESS HAS ACHEIVED 4. STRENGTHEN LOYALTY AND COMMITMENT OF STAKEHOLDERS 5. ENHANCE DECISION MAKING OF BUSINESS 6. IMPROVE OVER ALL PERFORMANCE

Bill Gates

95% of market was controlled by Netscape Navigator. bill gates went into that by implementing internet explorer. made it so if you clicked on the internet icon you would automatically be sent to internet explorer. if you tried to delete internet explorer your computer would malfunction. (he was later sued for it, but managed to accumulate a majority of the market).

ISO Companies

Companies that meet certain standards

CSR

Corporate Social Responsibility. (all about balancing their responsibility. (this promotes long-term profitability)).

corporate social responsiveness

Corporations giving back to the needs of society with the help of their economic power.

Corporate social stewardship

Ex: public tv (citizens expected to donate to tv for the reason that they give you something for free).

The Corporate Social Responsibility Debate

For CSR: - Balances corporate power with responsibilities - Discourages gov't regulation - Promotes long-term profits for business - improves stakeholder relationships - Enhances business's reputation - return profits due to making relationships Against CSR: - Lowers economic efficiency and profit - imposes unequal costs among competitors - imposes hidden costs passed on to stakeholders - requires skills business may lack - places responsibility on business rather than individuals - Corporations need to think in the long run

corporate/ business ethics

For a corporation to become part of the solution to issues. having morals and mitigate negative inputs.

corporate/ global citizenship

Manufacturing domestically. Ex: VHS > DVD, and NIKE

Stages of Corporate Citizenship

Stage 5: Transforming Stage 4: Integrated Stage 3: Innovative Stage 2: Engaged Stage 1: Elementary by the business doing these things they have the ability to change the game in their favor until it becomes a standard since all businesses will want to be in on the advantage.

Social Reporting

When a company decides to publicize information collected in a social audit.

Social audit

a systematic evaluation of an organization's social, ethical, and environmental performance.

Enlightened Self-Interest

by doing good for the community at a cost to you but then the community does good for the business in return by purchasing their products. (win-win)

Reputation

refers to desirable or undesirable qualities associated with an organization or its actors that may influence the organization's relationships with its stakeholders.

Goals of all businesses should be...

to do no harm