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Project RESPONSE: Results and Insights “Understanding and Responding to Societal Demands on Corporate Responsibility” Kiev, Ukraine 6 th June, 2008.

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Presentation on theme: "Project RESPONSE: Results and Insights “Understanding and Responding to Societal Demands on Corporate Responsibility” Kiev, Ukraine 6 th June, 2008."— Presentation transcript:

1 Project RESPONSE: Results and Insights “Understanding and Responding to Societal Demands on Corporate Responsibility” Kiev, Ukraine 6 th June, 2008

2 Collaborative Effort IBM Johnson & Johnson Microsoft Shell Unilever European Academy of Business In Society (EABIS) Zollo, Berchicci, Casanova, Crilly, Hansen, Schneider, Sloan- INSEAD Neergaard, Hockerts Pedersen - Copenhagen Bus. School (CBS) Perrini, Minoja, Tencati, Pogutz – Bocconi Univ. Gasparski, Lewicka - Leon Kozminski Academy Hackl, Reinhold -Impact Henri-Claude de Bettignies – INSEAD Tom Dunfee – Wharton Ed Freeman – U. of Virginia Bruce Kogut – INSEAD Eric Orts – Wharton Peter Pruzan – CBS David Vogel - Berkeley Jim Walsh – U. of Michigan Academic Members Business Advisory Board Academic Advisory Board Funded with a generous grant by the European Commission’s 6 th Framework Program

3 1.1 M euros EU funding over 3 years + 320K euros private 1.1 M euros EU funding over 3 years + 320K euros private 20 multinationals from Europe and US 20 multinationals from Europe and US 427 interviews (210 senior managers, 217 stakeholders) 427 interviews (210 senior managers, 217 stakeholders) 1,100 managers surveyed in 9 companies, 8 pending 1,100 managers surveyed in 9 companies, 8 pending 93 managers in 4 CSR learning experiments 93 managers in 4 CSR learning experiments 21 academics, 5 Ph.D. students and 5 RAs in 5 European and 4 US schools (incl. Advisory Board) 21 academics, 5 Ph.D. students and 5 RAs in 5 European and 4 US schools (incl. Advisory Board) RESPONSE: Breadth + Depth

4 Research Questions What do managers understand as their company’s responsibilities towards society? What do managers understand as their company’s responsibilities towards society? How does that differ from stakeholders’ beliefs? How does that differ from stakeholders’ beliefs? What factors explain the difference? What factors explain the difference? What factors explain socially responsible behavior in managers? What factors explain socially responsible behavior in managers? How effective are different training approaches? How effective are different training approaches?

5 What is New in RESPONSE? Expanding the Scope of CR Investigation Individual Organisation Internal changeExternal change Orientation towards Focus on DEBATE & RESEARCH TODAY FOCUS of RESPONSE

6 Research Methodologies Case comparison study  19 large multinationals  In matched pairs/triads  8 sectors  3 regions  For each company:  11 managers interviewed  12 stakeholders  “Fact finding” field work  In selected companies:  Web-survey of random sample of managers Learning Experiments  4 large multinationals  Diverse managerial roles  3 types of intervention:  Executive education  Meditation coaching  Relaxation techniques  Random group allocation  Pre-post training survey  4 decision scenarios  Standard psychology tests

7 1. Alignment Matters 2. Mind the Gap 3. Moving Targets, Sharpen Aim 4. Corporate Social Innovation 5. From the Inside-Out 6. Reinventing Stakeholder Engagement 7. Developing Responsible Managers Insights from The Research

8 Alignment of Mindsets “the degree to which managers and their stakeholders frame their thinking about corporate social responsibility in similar ways” Hypothesis: The greater the alignment between a firm’s managers and its stakeholders, the greater its social performance

9 Dimensions of Alignment Cognitive gap type MeasurementMeaning Gap 1: Stakeholder identification Order in which interviewees mention stakeholders Salience of stakeholders Gap 2: Risk ranking Ranking of stakeholders based on their perceived impact on the company Perceived ‘risk’ posed by stakeholders Gap 3: Responsibility ranking Ranking of stakeholders based on the perceived impact the company has on them Perceived responsibility toward stakeholders Gap 4: Perceptions of Corporate Social Performance (CSP) Level of social performance as judged by interviewees Perceptions of CSP

10 Alignment Matters for Social Performance! Across all dimensions, the highest social performers have greater cognitive alignment (i.e. smaller gaps) with their stakeholders.

11 1. Alignment Matters 2. Mind the Gap 3. Moving Targets, Sharpen Aim 4. Corporate Social Innovation 5. From the Inside-Out 6. Reinventing Stakeholder Engagement 7. Developing Responsible Managers Insights from The Research

12 How do managers’ and stakeholders’ differ in their framing of social responsibility?

13 The Issue Gap Prevalent managerial understanding of CSR is avoiding harm. Stakeholders are more likely to define CSR in terms of doing good.

14 Narrow, firm- centric scope of responsibility Broader, societal scope of responsibility “Fair play in society towards employees, towards environment. Meet the law.” (Manager, chemicals) “Creating programs to help communities in education, health care and environmental protection.” (Stakeholder, pharma) “Corporations need to position themselves as responsible corporate citizens on the world stage – at the risk of taking positions not widely shared in the business community.” (Stakeholder, natural resources) “CSR is doing well in one's own business, having in mind the stakeholders” (Manager, banking ) Cognitive Framing of the Scope of CSR

15 Scope and Depth of CSR Perspectives Firm View Stakeholder View World View Shallow Compliance and risk management (reputation) Shareholders, employees, customers Industry-specific global issues (e.g. health for pharma) Deep Moral duty (give back to society), ethical boundaries Suppliers, partners, government, communities, NGOs, unions, SRAs, media MDGs, climate change, hunger, health, poverty, education, human rights Frequency of CSR issues in managers’ responses Frequency of CSR issues in stakeholders’ responses 64%20%15%35%32%34% 64% 35% 49% 51%

16 1. Alignment Matters 2. Mind the Gap 3. Moving Targets, Sharpen Aim 4. Corporate Social Innovation 5. From the Inside-Out 6. Reinventing Stakeholder Engagement 7. Developing Responsible Managers Insights from The Research

17 What effect does the business environment have on alignment? Hypothesis: The more stable the business environment, the greater the alignment between a firm’s managers and stakeholders

18 Environmental Dynamism Enhances Alignment However, we found that alignment is associated with: Higher levels of stakeholders’ pressure Higher levels of stakeholders’ pressure Industries characterised by high levels of change; Industries characterised by high levels of change; Regions marked by faster economic change; Regions marked by faster economic change; Corporate responsibility initiatives motivated by an innovation-driven business case; and Corporate responsibility initiatives motivated by an innovation-driven business case; and Business strategies focused on differentiation and meeting complex customer requirements. Business strategies focused on differentiation and meeting complex customer requirements.

19 1. Alignment matters 2. Mind the Gap 3. Moving Targets, Sharpen Aim 4. Corporate Social Innovation 5. From the inside-out 6. Reinventing Stakeholder Engagement 7. Developing Responsible Managers Insights from The Research

20 What is the business case for social responsibility? Does the business case matter?

21 The Business Case for Social Responsibility Managers were asked to allocate 10 points in total among the following statements: Managers were asked to allocate 10 points in total among the following statements: Corporate Responsibility … … reduces firm risks … reduces costs and increases operating efficiency … helps our firm to sell more and at higher margins … is a source for new market opportunities

22 The Business Case for Social Responsibility Firms that place greater emphasis on new market opportunities (NMO) have greater cognitive alignment (i.e. smaller gaps) with their stakeholders… … and have higher social performance (level of stakeholder satisfaction) Stakeholder identification RiskResponsibilityPerformance

23 1. Alignment Matters 2. Mind the Gap 3. Moving Targets, Sharpen Aim 4. Corporate Social Innovation 5. From the Inside-Out 6. Reinventing Stakeholder Engagement 7. Developing Responsible Managers Insights from The Research

24 To what extent is social responsibility integrated into the firm? Does it matter?

25 Insights CSR is rarely integrated in: CSR is rarely integrated in: Management development programs Management development programs incentive systems incentive systems Resource allocation (corporate growth) decisions Resource allocation (corporate growth) decisions Competitive strategy decisions Competitive strategy decisions However, the extent of integration leads to: However, the extent of integration leads to: Better alignment of managers’mindsets with stakeholders’ Better alignment of managers’mindsets with stakeholders’ Higher levels of satisfaction of stakeholders (social performance) Higher levels of satisfaction of stakeholders (social performance)

26 1. Alignment matters 2. Mind the Gap 3. Moving Targets, Sharpen Aim 4. Corporate Social Innovation 5. From the inside-out 6. Reinventing Stakeholder Engagement 7. Developing Responsible Managers Insights from The Research

27 What effect does stakeholder engagement have on alignment? Hypothesis: Stakeholder engagement drives alignment of mindsets - Enhances “sensing” stakeholder expectations - Potentially influences managers’ behaviour

28 Surprisingly, no clear link between stakeholder engagement and alignment Stakeholder Engagement and Alignment Stakeholder identificationRiskResponsibilityPerformance

29 Insights 1. Stakeholder engagement crucial but not enough to achieve excellence in CSR 2. Shift to more collaborative model geared towards internal change 3. Stakeholders have a responsibility to: Understand companies better Understand companies better Help them (CSR group) drive internal change process Help them (CSR group) drive internal change process

30 1. Alignment matters 2. Mind the Gap 3. Moving Targets, Sharpen Aim 4. Corporate Social Innovation 5. From the inside-out 6. Reinventing Stakeholder Engagement 7. Developing Responsible Managers Insights from The Research

31 How can managers’ sensitivity towards the social impact of their decisions and actions be enhanced?

32 Insights Developing social consciousness in managers is possible… Developing social consciousness in managers is possible… Training approaches differ in effectiveness Training approaches differ in effectiveness Internal training fails to change managers’ behavior Internal training fails to change managers’ behavior Standard executive education - weak or no impact Standard executive education - weak or no impact Meditation-based coaching - positive impact on behavior and on psychological factors Meditation-based coaching - positive impact on behavior and on psychological factors Stress management techniques - unexpected efficacy, although not as strong as meditation Stress management techniques - unexpected efficacy, although not as strong as meditation More research needed to probe these exploratory findings More research needed to probe these exploratory findings

33 Conclusions & Recommendations

34 Explaining Social Performance STEP 1: What factors characterize the best social performers across the 8 sectors studied?

35 Explaining Alignment of Mindsets STEP 2: What factors characterize the companies with the highest degree of alignment in mindsets?

36 Implications for Business Managers Implications for Business Managers Redefine the notion of CSR Redefine the notion of CSR Not only “Do No Harm”, but also “Do Good” Not only “Do No Harm”, but also “Do Good” From “Firm-centric” to “World-centric” From “Firm-centric” to “World-centric” From “their impact on us” to “our impact on them” From “their impact on us” to “our impact on them” Reframe “Why” CSR Reframe “Why” CSR From risk/reputation to innovation From risk/reputation to innovation Rethink the CSR challenge: Rethink the CSR challenge: What: from external engagement to internal change What: from external engagement to internal change Who: the CSR group as champion of internal change Who: the CSR group as champion of internal change With whom: the stakeholder groups as co-drivers With whom: the stakeholder groups as co-drivers

37 Implications for Stakeholders Social Rating Agencies should: Social Rating Agencies should: assess CSR integration assess CSR integration evaluate the gap in mindsets evaluate the gap in mindsets NGOs might need to: NGOs might need to: Learn about the companies’ operations Learn about the companies’ operations Be skeptical about “engaging” companies Be skeptical about “engaging” companies “Inner ring” stakeholders: from counterparts to partners with CSR group to drive: “Inner ring” stakeholders: from counterparts to partners with CSR group to drive: 1. the internal change process to mainstream CSR 2. at a later stage, the external initiatives to enhance social welfare


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