Corporate governance &
corporate social responsibility
Module 3
corporate social responsibility-CSR
Corporate Social Responsibility (CSR)
“Achieving commercial success in ways
that honour ethical values and respect
people, communities, and the natural
environment.”
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Corporate Social Responsibility
(CSR)
• The impact of a company’s actions on society
• Requires a manager to consider his acts in
terms of a whole social system, and holds him
responsible for the effects of his acts
anywhere in that system.
CSR components ***
CSR Components
Because there is NO single accepted definition of CSR there is no
commonly accepted classification of the main components of
CSR.
Some agreement that it CSR components can be divided into:
• Workplace
• Marketplace
• Community
• Environment
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CSR Components
Leadership Commitment
Integration into business
WORKPLACE COMMUNITY ENVIRONMENT MARKETPLACE
- Equal Opportunity - Community - Environmental - Suppliers
- Working Hours CSR
Investment protection - Customers
- Staff Training and (cash/in-kind/ - Impact on air,
Development volunteering) water,
- - Community biodiversity etc
Health and Safety
- protection
Freedom of Association and
Human Rights
- Bribery and Corruption
• Engage with stakeholders
• Communicate CSR
Growing Importance of CSR in the Corporate & Non profit sectors
1. Stakeholders are demanding it
Customers/ Employees/ Investors/ NGO’s/ government
2. Increased Role of Business
• Size/ influence of business vs. governments
3. Globalisation: New CSR issues
• Diverse cultures/ norms/ jurisdictions
• Need to achieve consistency globally
4. Complexity and risks
• Increasing complexity, likelihood and significance of risk and wrongdoing
• New laws and regulations
• Greater influence of NGO’s and other stakeholders
• Increased merger and acquisitions
5. Greater likelihood of discovery
• 24 hour global news, media more aggressive
• High speed info access and dissemination
6. Greater cost of misconduct
• Fines, penalties, reputation damages
• Growing interest on emerging issues- social and environmental
Mission of the Organisation in a Socially
Responsible Environment
OR
The Objectives of CSR
The Objectives of CSR
CSR requires a manager to consider his acts in
terms of a whole social system, and holds him
responsible for the effects of his acts anywhere in
that system.
The Objectives of CSR include:
• Building profit
• Building people
• Building reputation
Building profit
1. Reduces and avoids costs and risks
• E.g. Costs of litigation & discrimination
2. Cause related marketing
• Examples of Cause Related Marketing in the UK include a partnership by
Cadbury Limited and Save the Children which raised funds for Save the
Children and focused community programmes to the benefit of Cadbury's
corporate image.
3. Reducing waste, increasing efficiency
4. Attracting and retaining investors
• Socially Responsible Investing in USA represents one in eight dollars
5. Higher Growth
• Research done by Harvard University shows that “stakeholder” balanced
companies showed 4x the growth compared to “shareholder” focused companies
6. Creating New Business Opportunities
Building people
1. Easier to attract staff
• E.g. Many companies (eg: Zurich Financial Services) found that there were
four times as many responses to job advertisements that mentioned the
firm’s community involvement.
• E.g. In addition, a study conducted by Net Impact in 1997 found that slightly
more than half of 2,100 MBA students in USA would accept a lower salary to
work with a socially responsible company.
2. Easier to retain and motivate staff
• E.g. In cases where staff whose volunteering had been supported by their
employers, 70% of then had an improved perception of the company, 58%
had improved personal development and 35% had improved professional
development
3. It builds creativity and innovativeness in the way your people think
Building reputation
1. It builds customer loyalty
• E.g. In HK: 38% of consumers in Hong Kong rate environmental and social
indicators amongst the top 3 factors in making purchases along with quality and
price. Centre of Urban Planning & Environmental Management, HKU( Lam, J.C.K.
Salahuddin, S. Tsoi, C.S.J (2003)
• E.g. Millennium Poll, over 23 countries (including China) with over 25,000
citizens worldwide, found that one in five consumers report either rewarding or
punishing companies in the last year based on perceived social performance.
2. Building political, capital and government support
• Especially through community involvement initiatives
3. Cooperation with local communities
4. Access to new markets
The CSR Objectives …..contd.
CSR in Equation Form Is the Sum of:
Economic Responsibilities (Make a profit)
Legal Responsibilities (Obey the law)
Ethical Responsibilities (Be ethical)
Philanthropic Responsibilities (Good corporate citizen)
Pyramid of CSR ***
Philanthropic Responsibilities
Be a good corporate citizen.
Ethical Responsibilities
Be ethical.
Legal Responsibilities
Obey the law.
Economic Responsibilities
Be profitable.
Business Responsibilities & Mission in the
21st Century
• Demonstrate a commitment to society’s values and
contribute to society’s social, environmental, and
economic goals through action.
• Insulate society from the negative impacts of
company operations, products and services.
• Share benefits of company activities with key
stakeholders as well as with shareholders.
• Demonstrate that the company can make more
money by doing the right thing.
Trends ***
1. In many countries, CSR was initially about charitable giving.
Today, internal aspects seen as just as important as external
aspects.
2. Around the world, CSR has become BIG business- there are local
non-profit organisations working on CSR- advocacy organisations
and business associations
3. Companies are being watched by investors, consumers, media,
government, employees on their CSR performance- much more
emphasis on:
• The process of stakeholder engagement
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• Supply chain and sphere of influence
Trends
4. Companies are measuring and reporting their CSR performance:
• UK- Corporate Responsibility Index
(The CR Index is the UK’s leading and most in-depth voluntary
benchmark of corporate responsibility).
• Global Reporting Initiative
(The Global Reporting Initiative (GRI) is a non-profit organization
that promotes economic sustainability. It produces one of the world's
most prevalent standards for sustainability reporting).
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