MSI Midterm
Charitable nonprofits
"nonprofits" ="501(c)(3) tax exempt organizations other than private foundations"
4 Measurement Steps of CSR
- Inputs: investments in money / time - Outputs: direct results of investment - Outcomes: changes that result from inputs and outputs - Impact: how the outcomes solve social issues, long-term benefits for stakeholders, society or business
Triple Bottom Line
recognition of the need for organizations to improve the state of people, the planet, and profit simultaneously if they are to achieve sustainable, long-term growth
light green
"[That person] looks at business as an ally, looks at the market as the solution. Business is the power. So if we're going to solve the problems we face, it has to come through business -- focus on the solution and environmental comfort
Pros and Cons of employees first
•Benefits: Loyalty, better customer service, more productivity •Challenges: Labor unions (i.e. contract negotiations), how to transfer values to employees in time of crisis, how to maintain benefits and continue to prioritize employees
Double Standard -- corporations vs. non profit
•Compensation - don't like nonprofit to pay employees when helping other people •Advertising - don't like to see $ spent on charity - don't see cumulative benefit •Taking on risk to pursue ideas to generate revenues - kills innovation •Time- No patience on waiting for results based on long-term investments •Profit to attract risk capital - capital access limitation
social impact strategy (SIS)
•Corporate Giving/Philanthropy •Employee Volunteer Engagement •Corporate Social Responsibility (CSR) •Corporate citizenship •Sustainability •Environmental, Social, and Governance (ESG) programs
b.good stakeholders
•Customers get all of the attention •Not enough to other groups, such as employees, other advocacy groups, etc •Community engagement is really strong as a result of the type of engagement and the nature of it •However, when looking at their website, it seems they are not really promoting community as much - makes you wonder how effective/sustainable/scalable has been
nonprofit stakeholders
•Employees (whether paid or unpaid volunteers) •Members (some nonprofits have paying or honorary members) •Volunteers, from board members to the generous folks who help you keep your organization running •Beneficiaries of your services or "customers." These beneficiaries might be the homeless people you serve or clients, such as YMCA subscribers who participate in activities •Donors, grant givers such as foundations, state, or federal agencies that provide funding are stakeholders. Every charity should have a basket of income from a myriad of sources. Each source brings stakeholders that must be kept interested and engaged •Your local community. Every nonprofit is part of a broader community, a citizen of society. As such, nonprofits must honor and participate in community activities and cultivate community leaders, institutions, and government agencies •Other nonprofits. Most charities now realize they cannot accomplish their missions or raise funds by themselves. Think about partnering with other charities rather than competing with them
Prioritize the shareholder (cons)
•Investing in workers & communities is the way to be more successful in the long term •CEOs commit to meet the needs of ALL stakeholders: investors, employees, communities, suppliers & customers •The most successful companies put their customers first and invest in their communities & employees
hybrid organizations (cons)
•Legal structure: Two options that are imperfect •Financing: current pathway unclear •Customer & beneficiaries dilemma Organizational culture & talent development
Role of the non-profit sector in social change (Dan TED talk)
•Philanthropy is the market for those who don't have anyone else coming •Social problems are massive in scale, organizations are tiny and system keeps it that way
challenges to stakeholder theory
•Stakeholder analysis can be complicated •Prioritizing stakeholders is challenging, lots of competing interests •Even when proposals make sense, costs or cost savings might not make them justifiable •Aligning business goals with employee's goals •Understanding , awareness, efficacy of CSR type strategies for all stakeholders
World Bank Group
•The World Bank Group has a treaty-based relationship with the United Nations (UN) that dates back to its founding, and through that relationship, works to build a partnership that supports Member States and contributes to effective development outcomes while preserving the distinct mandates of each institution •World bank was created to help rebuilt Europe after WWII and since then has pursued the primary objective of helping different countries and region advanced, end poverty and improve prosperity Meaningful stakeholders: Customers, Regulators, Community Groups, Employees
employee engagement
an individual's involvement, satisfaction, and enthusiasm for work
Impact measurement
analysis of impact, including nonprofit value of news stories
stakeholder
any group or individual with an interest or a stake in the operations of the company or organization
Business Roundtable
One of the most effective organizations promoting direct communications between business and policy makers
for-profit corporation
a corporation whose objective is to make a profit
dark green
"Business is the enemy because they just want to make money and they don't care about the environment" -- focus on the problem and environmental benefit
Rana Plaza
- April 2013, an 8 story building, Rana Plaza, collapsed in Bangladesh injuring 2,000 and killing 1,129 people - many of these workers were poorly paid and working in less than desirable working conditions - the building was originally a 5 story building but they added 3 floors without legal permits - this event called the worlds attention to problems and challenges that continue today there are steps that can be done to prevent catastrophes like this, but these choices also can have a back-lashing effect
Nonprofit (pros)
- Economic engines: Positive contribution to economy greater than their mission - Improving the lives of every person and allows you to do something good - A non-profit organization qualifies for a favored tax status at the national level - The founders are kept separate from the organization (similar to LLC): Protection of assets - It holds a legal status that remains intact: even if founders no longer associated - There is eligibility for private and public grants: Help founders w/ limited funds to scale - The 501(c) structure is not the only option available: Can be informal as well - It may qualify for certain employee benefits: Can qualify for group doctors like life/health insurance
corporate volunteer initiatives
- Employee volunteering has become significantly more strategic, with issue-focused global volunteer days that simultaneously engage thousands of employees around a theme and with skills-based volunteering - An estimated 25.1 percent of US adults volunteered in 2017, contributing an estimated 8.8 billion hours, valued at approximately $195.0 billion1
B. Good Case Study
- Focus of the strategy was active community participation and transparency in the allocation of resources in social impact initiatives. - Potential Positives - Innovative and transparent models of customer engagement - It is a low-cost, self-sustaining program - Generates good will for the brand - It can be difficult to closely manage customer-driven activity - Can the company fully trust consumers that they will drive your brand/resource allocation decisions in the right direction? - Are they measuring impact or is the discussion just at the input/output level? - Is there a theory of change at the center of the activities?
stakeholder analysis checklist
- Gather information across your organization - Identify stakeholders group (can be internal/external and primary/secondary) Primary: Define the business, vital for its continued existence Secondary: Affect relationships w/ primary stakeholders - Map your stakeholders (primary around, secondary in second tier) - Be specific - Prioritize your stakeholders (power/interest matrix) - Understand your stakeholders - Develop strategies of action (no trading interests, look for synergies) - Communicate & develop relationships w/ stakeholder
Employee Stakeholders
- If you put employees first, they will treat your customers well, your customers will come back and that is what makes your shareholders happy - Inspiring people leads to more productivity - It also brings loyalty to the company (i.e example of stock price drops bw 1990-1994) - Delivers an experience, not a service, that makes customers feel loved
Nonprofit Facts
- Nonprofit is a tax status, not a way of operating - Nonprofits can make a profit, and that surplus revenue should be used for its charitable purpose, its mission - This doesn't mean not compensating its employees fairly (i.e. overhead)
Impacts of Nonprofits
- Nonprofits create work opportunities for millions of individuals above and beyond the millions they employ directly - Nonprofits that provide care for children or elderly parents allow family members who would otherwise shoulder the burden of providing care to instead work outside the home. - Nonprofits provide job training and placement services for people who would otherwise be unemployed or underemployed - Nonprofits consume goods and services that create more jobs. They spend nearly $1 trillion annually for goods and services, ranging from large expenses, like medical equipment for nonprofit hospitals, to everyday purchases such as office supplies, food, utilities, and rent - Nonprofits attract other employers
important GRI report aspects
- Organization's most critical impacts -positive or negative - on the environment, society and the economy - Only provide information on the issues that are really critical (i.e. material aspects) in order to achieve the organization's goals for sustainability and manage its impact on environment and society - Include both general standard disclosures and specific standard disclosures, the disclosure management approach (DMA- including aspects and boundaries), indicators, omissions (very important), partial applications of the GRI rules, and specific sector issues reporting
Hybrid Organizations
- Organizations that combine commercial & social values - complimenting each other - Primary mission to pursue a social mission BUT relies significantly on commercial revenues to sustain operations - Significant growth in the past 5Y - bc of social entrepreneurs willingness to be less dependent on donations & subsidies and increased interest in creating sustainable financial models - Fountain of innovation
5 Principles of CSR Impact Measurement
- Stakeholders: Involve internal and external stakeholders - Start with objectives: Societal and business objectives must be considered - Focus: On programs with actual measurable impact - Be transparent: Transparency and credibility are important - Have others substantiate: Validate Results
Nonprofit (cons)
- Strained to meet increased public needs: 57% couldn't meet demand; 65% among low income communities - Policy proposals at federal and state level threaten work of nonprofits: policy makers can take away resources, impose burdens, interfere with decision making, erect barriers and change laws that disrupt their work - Worrisome trends regarding charitable giving: over last 15 years, less individual donations - Continued lack of Diversity, Equity and Inclusion: gender pay difference, race impact - There are limited fundraising options available for investors: most agencies require a large sum of money, right at the start, from a foundation or family - There are added administrative costs to consider: Because a non-profit organization is kept in a special tax category, there is an extra level of paperwork that must be completed for this structure to be approved, and also meet reporting requirements - A non-profit can lose their tax status: if they fail to complete annual deadlines, etc. - People are often critical of non-profit decision-making: financial statements which are released by a non-profit organization become part of the public domain. That means anyone is permitted to review the statements and offer their opinion on it. - There may be a lot of competition for funding - The 501(c)(3) status prevents political campaigning or lobbying: Some lobbying is permitted, but "too much" risks a loss of the tax-exempt status - "too much" is not well defined - Unfairly compared against for profits when it comes to overhead but still expected to deliver results without investment in resources (i.e. think of the ted talk) - Other issues: Salaries are still taxed, board members are usually volunteers
CSR and corporate sustainability similarities
-Both CSR and corporate sustainability focus on helping companies run in a way that allows them to be ethically profitable—never at the expense of others. -Both CSR and corporate sustainability help companies make a positive impact on those around them.
fiscal sponsorship important points
-Largest sector is Arts, cultural and humanities -Sample is sector diverse (21/26 represented) -More than ½ in California & New York but sample is also geographically diverse -Fiscal sponsors tend to be medium/large orgs -Avg sponsors engage in multiple projects (i.e. 58) -90% sample have aligned missions & values -Sponsors appear willing to take on variety of projects -Services provided cluster around financial services
private regulation
-Profitability depends on the efficiency of their regulations -People that benefit from regulation pay for it -Based on the need for regulation from within the industry
net positive
The positive consequences outweigh the negative consequences of any solution or set of solutions.
How can nonprofits get funding?
1. charge for the work they do 2. get donations 3. miscellaneous ways to earn revenue
shareholder
A person who invests in a corporation by buying stock and is a partial owner
Sustainable Development Goals (SDGs)
A universal set of goals, targets and indicators that UN member states are expected to use to frame their agendas and political policies over the next 15 years.
systemic corporate strategies - phase 1
Companies rethinking their business strategy to play a stronger role in guiding sustainability (new concepts of operations, partnerships, government engagement, transparency)
Whirlpool case study
Customer: Customer centric model: Better understanding of their needs - focus on family care More realistic depiction of a family, aligning reality with values & outcomes Built a relationship of the brand with current and potential customers - created emotional connections Employees: Clear sense of purpose, grounded in the values of community, family ties and care for one another Employees recognize the commitment to reinvest in Benton as playing a central role in its value Improved recruitment and retainment of top talent Employees engaged in looking for practical solutions and business involvement as drivers of the company's ongoing community work Community: Involve non-profit partners like Habitat for Humanity in meaningful role as partner Headquarter in Benton and investment in city Use of community's natural resources to target tourism allowed for strategic land use Role of corporate catalyst to economic revitalization Collaborative program of Boys & Girls Clubs Social impact through Social Innovation
fiscal sponsorship mechanisms
Direct projects (full integration) Independent contractor project (control over contract) Pre-approved grant (transfer external funds) Group exemption Supporting organization (sponsored org can get donations from ext. funders, have tax benefit from relationships) and technical assistance (provide financial & admin help)
richard locke and workers
Emergence of a global supply chains presents a challenge. Richard Locke concludes that the private regulatory efforts of multinational companies, particularly codes of conduct, have not done much to improve labor standards but that are important. He identifies the shortcomings of private regulation—both the overemphasis on the compliance model and a naïve belief in capability-building solutions. He recognizes the roles of upstream pressures and customers in creating challenges for downstream suppliers. Locke believes that ensuring the fair treatment of workers— including real rights of association—is a public responsibility and is necessary to ensure fair treatment of workers in developing countries.
ESG
Environmental, Social, Governance
Upstream Supply Chain
Firm's suppliers, suppliers' suppliers, processes for managing relationships with them
Market Transformation
Linking sustainability and corporate strategy (create sustainability)
free markets
Markets that are allowed to operate without undue interference from the government
shared value
Michael Porter, approaches business decisions with understanding that economic gains and social progress are interconnected
ongoing compliance
Necessary for an organization can avoid jeopardizing its tax-exempt status, disclosure requirements, employment taxes, and other ongoing compliance issues. Key part of this are annual Tax PC990 Filings.
What global challenges/issues were selected by the UN to form the 2030 Agenda and Sustainable Development goals?
People: to end poverty and hunger Planet: to protect it from degradation, taking urgent action on climate change Prosperity: To ensure all human beings can enjoy prosperous and fulfilling lives and changes happen in harmony with nature Peace: To foster peaceful, just and inclusive societies, free of fear and violence Partnership: To mobilize the means needed to implement this agenda
Pros and Cons (b.good)
Pros: •Real customers promoting their brand generating good reputation •Volunteers help reputation Cons: •Risky business strategy to have their whole initiative in the hands of their consumers •Might be difficult for them to engage their customers in farther locations •Could be sustainable - but relying in customer advertising is not a safe/sustainable approach
Supply Chain Management (SCM)
The management of information flows between and among activities in a supply chain to maximize total supply chain effectiveness and profitability
shareholder primacy
The belief that a corporation should be run, primarily or exclusively, for the benefit of its shareholders.
systemic corporate strategies - phase 2
The business model itself reconceptualizes (new conceptions of corporate's purpose, consumption, business models & metrics)
global outsourcing
The purchase or production of inputs or final products from overseas suppliers to lower costs and improve product quality or design.
Milton Friedman's definition of the social responsibility of a business
To use its resources and engage in activities designed to increase profits, so long as it stays within the rules of the game, engaging in open & free competition without deception or fraud -- believes that you CANNOT increase profits and prioritize social responsibility as they are in direct conflict with each other
Corporate Social Responsibility (CSR)
Where companies look more deeply at how core business practices influenced economic, social and environmental issues Prioritizes the understanding that companies are responsible to a variety of stakeholders beyond their investors—employees, communities, customers, consumers and even future generations. Goes beyond philanthropy/volunteer engagement & requires companies to take a much closer look at their governance, supply chain, energy use and emissions, transparency, diversity and other business practices as stakeholders expect—and increasingly demand—much more. Triple Bottom Line example Michael Porter's Shared Value is another extension
foundation
a legal categorization of nonprofit organizations that will typically either donate funds and support to other organizations, or provide the source of funding for its own charitable purposes.
International Labor Rights Forum
a nonprofit advocacy organization headquartered in Washington, D.C., U.S., that describes itself as "an advocate for and with the working poor around the world"
corporate code of conduct
a set of ethical standards for managers and employees to abide by
supply chain
an entire system of producing and delivering a product or service, from the very beginning stage of sourcing the raw materials to the final delivery of the product or service to end-users
overhead
broad category of fixed costs that includes interest, rent, taxes, and executive salaries •Perceived as negative, especially if used for growth (but you need them for growth) •Forces organization to go without what they really need to grow
Enterprise Integration
business responds to market shifts to increase competitive positioning by integrating sustainability intro pre-existing business considerations (stop unsustainability)
negative externalities
by-products of production or consumption that impose costs on third parties
Nonprofit lifecycle
starting out --> applying for exemption --> required filings --> ongoing compliance --> significant events
stakeholder theory
ethical theory stating that social responsibility is paying attention to the interest of every affected stakeholder in every aspect of a firm's operation
greenwashing
exploiting a consumer by disingenuously marketing products or services as environmentally friendly, with the goal of gaining public approval and sales
Significant Events
for a Non-Profit ending the company can mean the proceeds go to the public unlike the sale or termination of a start-up/private company.
Material Aspects
important in GRI report •Issues significant to a business' economic, environmental and social impacts as well as issues that influence stakeholders and describe the organization's approach to managing each of its material Aspects (DMA). Key stakeholders play a critical role In assessing this •Boundaries: Indicate clearly where impacts occur - describe whether the impact lies inside or outside the organization
GRI
is a Global Reporting Initiative aimed at helping reporters prepare robust and purposeful sustainability reporting standard practice, to promote the use of sustainability reporting Strength of the GRI Creates a clear comparable framework for companies to follow Weakness of the GRI Lacks the ability to translate company data into a broader narrative of social impact GRI intersects with many other frameworks, including United Nations Sustainable Development Goals, Sustainability Accounting Standards, etc., with different levels of adoption. You will often see intersections/references to multiple frameworks in reports.
fiscal sponsor
is an already existing nonprofit organization with a 501©(3) status that has agreed to provide a legal home and support for currently non-tax-exempt entities. Also considered as nonprofits that advance the public benefit by facilitating the development and growth of charitable, mission-driven activities _____ is a way for individuals to launch an test new ideas without having to obtain the tax-exempt status or build a full-fledged organization. The _____ _____ can help with administrative services, oversight, and assume some or all legal and/or financial responsibility
shared value
meaningful benefit for society that also adds to your company's bottom line
social progress index
measures the extent to which countries provide for the social and environmental needs of their citizens aligned with SDGs Basic Human Needs •Nutrition •Water & Sanitation •Shelter •Personal safety Wellbeing •Health & Wellness •Environmental Quality •Access to basic knowledge •Access to info & comms Opportunity •Personal Rights •Freedom of Choice •Inclusion Access to advanced education
not paying out profits
no part of the organization's net earnings can be used for the benefit of any private shareholder or individual
Primary Stakeholders
people or entities that participate in direct economic transactions with an organization. Examples of ____ _____ are employees, customers and suppliers.
section 501(c)(3) organizations
refers to "public charities" (also known as charitable nonprofits) and "private foundations." The tax code considers "churches and religious organizations" (which the IRS defines to include mosques, synagogues, temples, and other houses of worship) to be "public charities."
liability of newness
situation that often causes new firms to falter because the people who start the firms can't adjust quickly enough to their new roles, and because the firm lacks a "track record" with customers and suppliers
virtuous cycle
system that improves over time
nonprofit organization
tax exempt institution that functions much like a business, but does not operate for the purpose of generating profits
governance
the activity of governing a country or controlling a company or an organization; the way in which a country is governed or a company or institution is controlled
Clean Clothes Campaign
the garment industry's largest alliance of labor unions and non-governmental organizations. The civil society campaign focuses on the improvement of working conditions in the garment and sportswear industries.
Stakeholder Analysis
the process of identifying an organization's stakeholders and assessing their influence or how they are impacted
capacity building
the provision of funds and technical training to allow developing countries to participate in global environmental governance
Secondary Stakeholders
the stakeholder who does not have any interest in the company, however, they have indirect influence over the company. They include competitors, trade unions, media groups, government, community, and other pressure groups.
strategic CSR
unlocks shared value - mutually reinforcing success for company and society
What are the benefits and drawbacks of companies, non-profits or social ventures who choose to align themselves to the UN SDGs and 2030 Agenda, as part of their social impact strategy?
•Benefits: •Pursuing a social agenda that is based on known issues across the world •Transparency and prioritization to the issues that are important •Measurement against a known standard •Drawbacks: •Commitment to delivery might fall short. •Sometimes it might not aligned 100% with what they do/how they operate (depends on the country-/region/industry, etc.)
Gravity Payments Case Study *
•Benefits: Elevating live standards for all employees, generating tremendous loyalty and productivity, paying forward- multiplying benefits to clients & community •Challenges: sustainability of the solution, scalability of the solution, managing messaging to clients & other stakeholders •Other considerations: Remunerating according to performance & seniority •Other broader/external CSR: Might take longer to create tangible results but might be more sustainable
Prioritize the shareholder (pros)
•The executive is an agent serving the interests of his principals •The executive is an expert on running the corporation •The better a corp performs, the more value it creates and individuals can choose to donate their own money to worthy causes •If the executive dedicates money to social causes, he/she is in fact imposing taxes & deciding how the tax should be spent
triple bottom line (cons)
•Three separate accounts cannot be easily added up •Difficult to measure planet and people account in the same terms as profit (aka: Finding applicable data, and calculating a project or contribution to sustainability - Profitability is inherently quantitative, so it is easy to measure) •Making the 'business case" for People & Planet might be challenging •Engaging management & colleagues (e.g. a 20015 survey of 700 business, 65% of respondents said convincing leadership was the greatest challenge)
hybrid organizations (pros)
•Vector of social value & commercial revenue reinforcing each other, managers don't need to choose b/w mission and profit, virtuous cycle of profit & reinvestment in the social mission
generic supply chain
•the sourcing and extraction of raw materials. The raw materials are taken by a logistics provider to a supplier, which acts as the wholesaler. The materials are taken to a manufacturer(s) that refine and process them into a product. Then it goes to a distributor that wholesales the finished product, which is next delivered to a retailer. The retailer sells the product in a store to consumers. Once the consumer buys it, this completes the cycle. The demand drives the production of more raw materials, and the cycle continues.