Stakeholders in Corporate Governance
(CG) and Corporate Social
Responsibility (CSR)
Lesson Seven
1
Outline
• CG and CSR
• The concept of (CSR)
• CSR and sustainability
• Moving towards integrated reporting
2
Corporate Governance (CG)
The system by which companies are directed
and controlled.
• Responsibilities (who should do what?)
• Accountability (to whom should those with
responsibilities, account? and how?)
• Checks and Balances (the system of supervision
and control procedures and communication flows)
3
Why is CG important?
Responsibilities
• Institutional
of a company • Meeting the
arrangements • Accountability expectations of
for governing a stakeholders
company • Transparency
• Compliance
CG (CSR
CG
embedded)
4
What is Corporate Social
Responsibility (CSR)?
• CSR is corporate form of self-regulation
integrated into the business model to create a
positive impact on the stakeholders and the
environment.
• CSR refers to companies taking responsibility
for their impact on society (European
Commission).
5
Who is stakeholder?
• “Any identifiable • The term ‘stakeholder’
group or individual encompasses a wide
who can affect the
achievement of an range of interests: It
organisation’s refers to any
objectives, or is individual or group on
affected by the which the activities of
achievement of an
organisation’s the company have an
objectives”. impact.
(Mallin, 2007)
(Freeman and Reed,
1983)
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Who is stakeholder? (Contd.)
Internal stakeholders
• Employees
• Managers
• Owners
Multiple
agreements External Stakeholders
between the • Customers
‘enterprise’ • Suppliers
and • Competitors
‘stakeholders’ • Special interest groups
(Freeman and • Government
Reed, 1983) • Local communities
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Why is CSR important?
Enterprise
In the Economy of
Physical interest
environment the country
of :
Society
8
The Relationship Between CSR and CG
Traditional Contemporary
view view
CG on shareholder CG is an umbrella term
wealth maximization and CSR is getting
fused into CG practices
CSR focused on social
and environmental
impacts of a company Both focus on ethical practices in
(Stakeholders other business and the responsiveness of an
than shareholders) organization to its stakeholders and
the environment in which it operates
9
How do companies become socially
responsible?
• By following the law
• By integrating social, environmental, ethical,
consumer, and human rights concerns into
their business strategy and operations.
10
‘Why CSR?’ is linked to views about the
responsibility of a business
Narrow View Broad View
Rejected the view that Organisations earn their
corporate managers have right to operate in the
any moral obligations community
Accountable to society
Responsibility to increase for how it operates.
profits as long as it stays
within the rules Societal expectations
exceed profitability.
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Corporate Governance in Action 9.2
and 9.3
(TB1, Chapter 9 - Pages 229)
Different perspectives on CSR
Stakeholder
Strategy-
Ethical driven
CSR
Political Societal
Philanthropic
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Different perspectives on CSR (Contd.)
• The societal perspective (impact of corporate
activities on society)
• The strategy-driven perspective (social
responsibility is an integral part of the wealth
creation process)
• The stakeholder perspective (the alignment of
corporate values with the expectations of their
stakeholders)
14
Different perspectives on CSR (Contd.)
• The ethical perspective (corporate entities have an
obligation to act for the benefit of the society)
• The political perspective (CSR is no more than vested
interest at best and a public relations window-dressing
exercise at worst. Call for legislation on CSR)
• The philanthropic perspective (Putting something
back to the society.)
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Case Study 9.2
(TB1, Chapter 9 - Pages 238-239)
CSR Competency Framework of UK
British Government created to encourage
Levels of commitment to CSR practices
Attainment
Awareness Understanding society
Building capacity
Understanding
Questioning 'business as usual'
Application
Stakeholder relations
Integration Strategic view
Leadership Harnessing diversity
Core Characteristics
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CSR and Sustainability
CSR Sustainability
18
UN Global Compact on Sustainability
• A strategic policy initiative for businesses that
are committed to aligning with ten universally
accepted principles for human rights, labor,
environment and anti-corruption.
• GRI develops guidance regarding these
principles and integrates UNGC issue areas
into Sustainability Reporting Guidelines.
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UN Global Compact Ten Principles towards SDG
Dimension Principle
Human 1. Businesses should support and respect the protection of
Rights internationally proclaimed human rights
2. Make sure that they are not complicit in human rights abuses.
Labour 3. Businesses should uphold the freedom of association and the
effective recognition of the right to collective bargaining
4. The elimination of all forms of forced and compulsory labour
5. The effective abolition of child labour
6. The elimination of discrimination in respect of employment and
occupation
Environment 7. Businesses should support a precautionary approach to
environmental challenges
8. Undertake initiatives to promote greater environmental
responsibility
9. Encourage the development and diffusion of environmentally
friendly technologies
Anti- 10. Businesses should work against corruption in all its forms, including
corruption extortion and bribery.
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Towards Sustainability Reporting
Traditional
Financial Sustainability
Reporting Reporting
Provides ESG -
General purpose Environmental, Social
financial reports and Governance
information
Economic Beyond FS numbers
Performance Economic, Environmental &
Social Performance
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Global Reporting Initiative (GRI)
Guidelines on Sustainability Reporting
An integrated
disclosure framework GRI
for companies and Standards
their stakeholders to (2016)
assess performance
along economic, G4
environmental and G 3.1 (2013)
social lines. (2011)
G3
(2006) Presently
G2 From
used 2018
(2002) replacing
G1 G4
Evolution
(2000)
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Moving Towards Integrated Reporting
• A dimension of
IR
corporate reporting
• A new reporting model
• Provides ESG
• Integrates different
information along with
dimensions of corporate
economic information
reporting including SR
into a coherent whole
SR
23
External Environment
Opportun Strategy
Capitals ities and and
Capitals
(Inputs to Business) risks resource
(Outcomes of Business)
allocation
Governance
Society Organizati Organizati Society
on on
Financial Business Model Financial
Business Outputs
Activities
Manufactured Products Manufactured
Services
Human Inputs Waste Human
consumed or
transformed Other by-
Intellectual products
Intellectual
Social and Social and
Relationship Relationship
Performance Future
Natural outlook Natural
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Moving towards an Integrated CG System
“The system by which companies are directed and controlled,
in which sustainability issues are integrated in a way that
ensures value creation for the company and beneficial results
for all stakeholders in the long term.” (UNEP)
Sustainability
Governance for
outside of Integrated CG
sustainability
board's agenda
Phase 1 Phase 2 Phase 3
Holistic integration of sustainability in the
corporate strategy
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26
27
Summary
• What is CSR?
• How it is related with CG?
• What is the relationship between CSR and
sustainability?
• What is IR and why it is needed?
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